Let’s assume that Bob and Mary have been married for years and hold title as Joint Tenants. That’s good because it will avoid probate fees (technically estate administration fees).
However, as time progresses either Bob or Mary will pass away. Nothing happens! No one does anything and the property just sits there in Joint Tenancy. But, the Joint Tenancy is finished. It’s done, it’s over. The difficulty is that nothing really takes place. As long as all the bills are paid ie, taxes and utilities, no one cares. And certainly, no one wishes to incur any legal fees.
Let’s assume that Bob passes away first; Mary now owns the property outright. Now, the problem is: what happens to the property when Mary passes away?
Let’s also assume that Mary has five children and many years ago, both she and Bob made Wills leaving everything first to each other, and then to the children equally.
We do have something of a problem. If Mary passes, her Estate will need to be probated and assuming further that the property is worth $1 million, then probate fees of $15,000.00 (1.5%) will have to be paid, that’s $30,000.00 if the property is worth $2 million.
Question: Could these fees be avoided?
Answer: Yes, quite easily.
What’s the Solution?
Mary needs a simple estate plan. The house should be removed from the Will and registered in Joint Tenancy with one or more of her children. A Trust document should be signed confirming that the Transfer constitutes a “resulting trust” in favour of Mary. So, Mary is still the 100% owner of her property. If she still lives there, the property remains as her principal residence and will be exempt from taxation upon her death (capital gains).
This is a simple and straightforward approach. It saves $15,000.00 to $30,000.00 in probate fees for the estate. Why pay them, if you don’t have to?
Brian Madigan LL.B., Broker