Calvin is looking for ways to avoid paying probate in Ontario. What are the risks of doing this?

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What are the risks of doing this?FP Answers: The provincial estate administration tax is a small price to pay to maintain control over your largest financial assetLast updated 2 days ago You can save this article by registering for free here. Or sign-in if you have an account.If you transfer your residence to your beneficiaries before you die, there are several potential issues to consider. Photo by Designer491/Getty ImagesWe independently select everything we recommend. Buying through us may earn us a commission, which supports our work.Q. I am retired and looking for ways to save tax on assets transferred to my children after my death. My principal residence makes up the majority of my estate and my heirs will likely have to pay probate on my home at the time of my death before it is transferred to them. Is there any way to transfer the title upon my death or sooner and avoid the 1.5 per cent probate in Ontario? What are the risks of doing this? —CalvinSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorFP Answers: Dear Calvin, estate planning requires you to consider your legal obligations. Your children, if you are not supporting them, may not be legal dependants. You may not have legal, but moral, obligations toward them.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againIf you choose to benefit your children after your debts, taxes and legal obligations are met, wonderful. This is why you need legal advice to prepare your will and estate plan. You need to identify what’s left after you cover your legal obligations.There are many ways to reduce Ontario’s provincial estate administration tax (EAT). This tax was formerly referred to as a provincial probate tax. Since your principal asset is your residence, you may wish to consider a transfer to a qualifying inter vivos trust (often called a living trust). This can avoid provincial estate taxes and keep matters private. There are pros and cons to consider but these trusts can avoid Ontario’s EAT.If you transfer your residence to your beneficiaries before you die, there are several potential issues to consider. You need your own lawyer to advise you. The beneficiary who receives an interest in your home needs his or her own separate lawyer for advice. Your property may not be your beneficiary’s principal residence, even if added as an owner. This may create tax issues and could require filing a trust tax return, unless an exemption applies.You do not mention if you have a spouse who may have an interest in your property. This is a legal obligation to consider. You need advice regarding your legal obligations to support a spouse. If you have a spouse, do you have a prenuptial agreement to allow you more freedom to make your will? Do you have a qualifying spouse? You can designate them as a beneficiary of registered investment plans such as a registered retirement savings plan (RRSP) for income tax and EAT savings.You did not mention if you have a line of credit or mortgage on the property. This must also be considered. If you add a person to the property title, you lose total control over the asset. This asset may also then be subject to the beneficiary’s creditors or spousal claims. Such transfers could force you to sell your residence before you die.You also do not mention your age or if you have considered your critical care needs.Ontario’s EAT is roughly 1.5 per cent based on fair market value, above the first $50,000 and less any registered indebtedness on the property. Having a mortgage may reduce the EAT. If there are multiple heirs, they must agree about how to handle the property, how it is to be maintained and how expenses are shared. You may, instead, want your trust or estate trustee to sell the property and divide the proceeds.You can also name adult children as designated beneficiaries of financial assets to transfer them on your death without a will, such as life insurance or segregated funds. There are ways to do this to avoid EAT and to prove a gift was intended if you speak to your lawyer.I usually recommend that parents maintain ownership of their home as long as possible. This may be the only reason why the beneficiaries call you weekly to see how you are. The provincial estate administration tax is a small price to pay to maintain control over what may be your largest financial asset.This information is no substitute for legal or tax advice. Edward Olkovich is an Ontario lawyer at MrWills.com. He is certified by the Law Society of Ontario as a specialist in estates and trusts law.Do you have a question for FP Answers? Email wealth@postmedia.com. Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.