In most provinces, some fee will be payable to the tax man if your assets
go through probate. In Ontario, for example, probate tax of 1.5% of assets
will be payable. Alberta, by contrast, imposes fees on a sliding scale
depending on the net value of the assets; the maximum is $525 imposed for
net value of property of $250,000 or more subject to probate.
However, if you own shares of private companies, you should ensure that you
have a secondary will that deals only with those shares. Why? Well, you may
be surprised to learn that shares of private companies do not require a
probated will in order to effect a transfer to the beneficiaries (unlike
bank accounts or real property).
Accordingly, by segregating your private-company shares in a separate will,
you can avoid probate tax on the value of your shares.
This can be substantial if the bulk of your wealth is tied up in
private-company shares. Therefore, if a secondary will is drafted to deal
with your shares, then the application for probate will only be made in
respect of your assets in your first will.
I mentioned above that a probated will would be required in order to
transfer real estate to your beneficiaries. However, it is possible to save
on probate fees on your home or other personally-owned real estate by
having a bare trustee company on title; the shares of such bare trustee
company can be dealt with under the secondary will.
Since you won’t need to change title to the property on your death (as it
will continue on in the name of the bare trustee company), a probated will
is no longer required for that purpose.
RRSPs and RRIFs
I recommend that you designate a beneficiary of a Registered Retirement
Savings Plans (RRSP) or Registered Retirement Income Funds (RRIF) directly
with the custodian itself rather than in a will.
This will do more than avoid probate fees. If you designate your spouse as
a beneficiary (which I highly recommend), the value of your RRSP or RRIF
will not be included as income in your final return, because there is a
deferral of tax for transfers to spouses.
If your spouse passes away before you, or you get divorced, you can
designate a child or grandchild who is “financially dependent” on you, so
that the RRSP will be taxed in the hands of the child or grandchild with a
low tax rate. (Note the financially dependent child or grandchild can also
specify a special annuity which will enable them to defer this tax while
they are minors or indefinitely if they are mentally or physically
“Financially dependent” usually means that the child or grandchild’s income
does not exceed the basic personal amount.
Your will can provide for gifts to registered charities, which, done in the
year of death, qualify for tax credits of up to 100% of your net income.
Although this sounds like a great tax-planning opportunity, there are
pitfalls that abound in this area. Care must be taken when drafting your
will. I say this because the CRA used to be of the opinion that if the
executors had discretion to choose between the value of the bequest and
which charity would receive the gift, the donation would not qualify for
the tax credit.
Although this position is no longer valid, I would highly recommend that
you speak with your advisor to ensure that an amount to be donated is
determined (whether a specific amount or a percentage), and that it is
clear from the terms of the will that the executor is required to make the
donation to a qualified donee.
You might also consider two other tax-saving strategies for your will:
* Principal residence.
Leave your residence to a beneficiary who will be able to claim the
* Forgiving debts.
If someone owes you money and you wish to forgive the debt, the best way to
do this could be in your will, so as to avoid certain debt-forgiveness
By properly tax planning your will by using some of the strategies I’ve
outlined, you can at least take comfort that upon your death, you will be
leaving a larger inheritance to your family, and a lot less the CRA.
Samantha Prasad, LL.B., is a Partner with Toronto law firm
Minden Gross LLP, a Meritas Law Firm Worldwide affiliate, and specializes in corporate,
estate, and international tax planning. She writes frequently on tax
issues, and is the co-author of
Tax and Family Business Succession Planning, 3rd Edition . She is also co-editor of various
Wolters Kluwer Ltd. tax publications. Portions of this article first appeared in The TaxLetter, © 2017 by
MPL Communications Ltd. Us
ed with permission.
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