You can take steps now to reduce probate fees and expenses by estate planning. Every estate must file a final tax return after the death of an individual which can trigger probate fees and other expenses. One method of helping to ease the burden on your estate by passing amounts directly to your beneficiaries, outside of your estate and probate process, is by owning deferred annuity policies such as segregated funds and term funds issued by insurance companies.
Probate fees are charged by the province for confirming that a will is valid and the executor has the authority to act, referred to as ‘Letters of Probate’. Depending upon the size of your estate, this fee can be as high as 1.4 per cent of the total value of your estate (in B.C.). This is in addition to exectuor fees (which can be up to five per cent of the total value of your estate), legal and accounting fees. Executors are responsible for locating the will, arranging the funeral, ascertaining names and addresses of beneficiaries, paying final and outstanding debts, locating all of the assets and locating documents for tax return preparation. The executor generally bases their fee upon the complexity of the estate.
In a previous article I talked about the cost and possible lock in period of mutual fund purchases. Unlike mutual funds, generally no early redemption charges are applied to segregated fund policies at the time of death. If you do not think you will require access to certain funds during the lock in period, you could purchase segregated funds with no up front cost and a lock in period, without the concern of deferred sales charges upon death. There are other considerations when deciding whether to purchase mutual or segregated funds and should be discussed in depth with your advisor.
In a future article I will discuss the pros and cons of segregated and term funds as well as the guaranteed 100 per cent death benefit that applies to some policies.
You must name a beneficiary other than your estate on segregated and term fund policies to ensure these assets go directly to the named beneficiary. If you name your estate, the proceeds will form part of your estate and all probate and other fees discussed above will apply.
Now is the time for estate planning; take away extra worry and give yourself and your loved ones estate planning peace of mind.
This article was prepared by Carol Plaisier, CFP®, FMA, AMP (Accredited Mortgage Professional) who is an Investment Advisor with DWM Securities Inc. This is not an official publication of DWM Securities Inc. and the views (including any recommendations) expressed in this article are those of the author alone, and they have not been approved by, and are not necessarily those of DWM Securities Inc. *Insurance products provided by Dundee Insurance Agency Ltd.
DWM Securities Inc., Member-Canadian Investor Protection Fund, is a DundeeWealth Inc. Company. For further information, Carol Plaisier, CFP®, Investment Advisor with DWM Securities Inc. and Insurance Advisor with Dundee Insurance Agency Ltd., can be reached at the DundeeWealth office in Parksville (250) 248-2399, or by email: cplaisier@dundeewealth.com, website: www.carolplaisier.com.