How to minimize probate?

Probate is a legal process that takes place after someone dies to distribute the remaining property as the will (or law if there’s no will) directs after paying all the debts and taxes.

First and foremost, it is to avoid probate which costs money and time.

Make sure you designate beneficiary to your pension, RRSP and TFSA.

For TFSA, there is an option called successor annuitant which is for spouse or common law partner. You can name your spouse or common-law partner as the successor annuitant to receive the proceeds of your TFSA account. If living at the time of your death and still your spouse or common-law partner, your successor annuitant can either move the investments and/or cash to their registered account (same type) without using any of their contribution room or withdraw the proceeds of your account.

For non-registered account, use a joint account of you and your spouse. This way, if one spouse passes away, the other spouse still has instant access to the account without probate.  Of course, it works if both of you share similar spending habits. If one is spender and the other is saver, there might be conflicts. In that case, it might make sense to have separate finances. Here is how some couples do it and live in peace.  Create a joint checking account. Both spouses contribute to it for shared expenses such as grocery, mortgage payment, contribution to retirement account, etc.  Each maintains their individual checking account and saving account where each deposit their own income.  Each is free to manage and spend the money in their own account after they contribute to the shared account.

In terms of houses or properties, there is key difference between joint tenancy and tenancy in common. For joint tenancy, the surviving spouse will own the entire house after one spouse passes away. In comparison, for tenancy in common, the one-half of the value of the property will be included in the deceased spouse’s estate which means probate cost and time! What a mess.  I didn’t know this when we purchased the house.  I only learned this when I studied for my certification.  I checked the deed of the house. Fortunately, it indicates joint tenancy. Our real estate lawyer just assumed that. He didn’t even check with us.  Please do check yours if you are not sure.

Published by Worthfy

Financial literacy and counselling

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