How to avoid probate on a house in Ontario

Upon a loved one’s death, someone must step in to manage their estate. Often, this is a loved one or someone the deceased appointed themselves during their lifetime. However, this doesn’t stop there, and the courts may step in through a process called “probate.” 

The process of undergoing probate isn’t absolute. For example, there are ways on how to avoid probate in Ontario that could help speed up transfer to heirs. In this article, we’ll talk about the process of probate and when it becomes necessary. 

What is probate? 

Probate is the process where the court formally approves the will of the deceased known as the testator. This is also where they determine that the will is valid and contains the true intent of the testator. During the process, the court also makes the following orders: 

• confirms the authority of the person named as the executor of the estate 
• gives a person the authority to act as the executor of the estate 

Here’s a simple overview of the probate process in Ontario: 

What are the grounds requiring probate? 

As a rule, estates must undergo probate before the assets of the deceased may be distributed to the heirs. Accordingly, an estate must undergo probate if it meets any of the following: 

• person died without a will 

• there is a will, but it does not name a trustee or an executor 

• the estate includes real property which does not pass to another person by right of survivorship 

• the real property of the deceased must be sold, and the sale requires a Certificate of Appointment of Trustee or a Small Estate Certificate 

• to provide proof of legal authority to receive money from bank accounts or investments of the deceased 

• when there is dispute or potential dispute regarding the validity of the will 

• when there is dispute about who should be the trustee or executor of the estate 

• certain beneficiaries are incapable of giving legal consent 

If any of these situations are present, the estate must undergo probate.  

Is it possible to avoid probate in Ontario? 

Based on the list above, there are situations when probate in Ontario is unnecessary. However, the question here is: how to avoid probate on a house in Ontario? Houses fall under the definition of “real property,” which means as a rule, it should go through probate. The exception is if it is passed through survivorship. 

Joint tenancy and rights of survivorship 

Rights of survivorship refers to the rights of a co-owner over real property in case the other owner dies. To illustrate, A and B have joint tenancy over a house and lot. If A dies, then their over the property is distributed to B without the need for probate. Note though that "joint tenancy” is a technical term that goes beyond mere co-ownership. 

Joint tenancy exists when all the following conditions are present: 

• unity of possession or when the joint tenants have equal rights to use and possess the entire property 
• unity of title or when all the joint tenants acquired their interest in the property through the same document or deed. 
• unity of time where their interest over the property started at the same time 
• unity of interest where the joint tenants hold equal shares over the property 

If all of these are present, then there is joint tenancy and rights of survivorship kick in. Hence, there is no need for the property to go through probate. Perhaps the most common situation for this is married couples who purchased real property at the time of marriage.  

Survivorship application process 

Note that the rights of survivorship must still undergo formal application. Compared to probate though, this process is easier and does not involve court intervention. Estate and personal tax planning attorneys in Toronto, Ontario usually take care of this process. To continue though, they will need the following: 

• death certificate as proof of death of the individual 

• valid identification of the person who died as well as the person claiming survivorship rights 

• proof of spousal status verifying the marital relationship between the deceased and the one claiming survivorship rights 

• if not married, any other proof of relationship between the parties proving that all the requirements of joint tenancy exist 

Survivorship applications can take months, depending on the documents needed and the workload in the registry office. Once confirmed, this is recorded with the land registry and becomes part of public records. 

So, the question of how to avoid probate on a house in Ontario has a simple answer. The house or real property should be under joint tenancy, allowing the owners to skip probate completely. Other than marital relationships, joint tenancy can exist between siblings, business partners, common-law partners, or anyone who meets the requirements. 

Joint tenancy versus tenants-in-common 

Joint tenancy is often confused with tenants-in-common (TIC), which is another type of co-ownership in Ontario. It’s important to understand the difference between the two because TIC does not have survivorship rights. Hence, if the goal is to avoid probate, you need to make sure that the ownership is “joint” instead of TIC. 

So, what makes TIC different? TIC exists if: 

• there is unequal ownership such as when one co-owner owns 60 percent of the property while another owns 40 percent 

• the property is acquired at different times such as when an owner sells a portion of the property to another person 

Under TIC, the share of the deceased over the property does not necessarily go to the co-owners. If the intention is to make use of survivorship rights, then having an estate attorney handle the paperwork is often the best way to ensure there’s no confusion with TIC. 

Existence of a will and survivorship rights 

The question now is what if the deceased has a will that disposes of the property covered by survivorship rights? The good news is that survivorship rights will prevail over the will. So, is the will ignored? Not necessarily. If the will itself passes probate, the wishes of the deceased will be followed except for the parts that cannot be enforced – like survivorship. 

Other ways to avoid probate 

The question of how to avoid probate in a house in Ontario has several answers. Triggering survivorship rights through joint tenancy is just one of those ways. Other possible methods on how to avoid probate on a house in Ontario include: 

Gifting assets during your lifetime 

Probate is done for properties that are passed after the death of a person. If passed during their lifetime, however, these can be viewed as gifts or donations. Probate is not necessary, but this has the drawback of losing possession of the property at the time of the gift. It’s therefore not something property owners do if they still use the house. 

Inter vivos trusts or living trusts 

Inter vivos is a Latin term that literally translates to “between the living”. In this trust type, a person establishes a trust and appoints a trustee to manage the assets. During their lifetime, they have full access to the assets under the trust. The trustee then takes over management after their death and distributes the assets to the beneficiaries. 

This helps avoid probate because the trust essentially came into effect during their lifetime. This is distinguished from testamentary trusts which only come into effect after the death of the person. Note though that taxes still have to be paid on these assets, requiring the input of Ontario estate and personal tax planning attorneys. 

There are two types of living trusts: revocable and irrevocable. Here’s the difference between the two: 

Alter ego trusts 

Alter ego trusts are very similar to living trusts. The main difference is that it is limited to Canadians who have reached 65 years of age or older. Taxes are also deferred for this type of trust, which makes it more attractive for elders. Alter ego trusts are granted through the Canadian Income Tax Act (CITA). 

Is transfer-on-death a valid way to avoid property probate in Ontario? 

No. Transfer-on-death (TOD) for real properties is not possible in Ontario. This is a situation where assets can be transferred directly to a beneficiary upon the death of the benefactor. It bypasses probate too but is limited to investment accounts, bank accounts, and securities. 

For real properties though, TOD is unlikely. On the upside, those who are planning their estate can utilize different methods for administering their properties upon passing. This means that while real properties cannot be the subject of TOD, financial assets may be addressed through TOD documentation. 

What are the pros and cons of avoiding probate? 

Throughout this article, we’ve talked about how to avoid probate on a house in Ontario and by extension, with other assets. The question though is: why avoid probate at all? Here are the pros and cons of probate: 

Pros 

• Probate is supervised by the Court, which means that each step undergoes scrutiny to determine if it complies with the content of the will 

• In probate of estates without a will, advance planning is not really required. In most cases, the default laws of intestacy also match the typical distribution of assets of people 

• Probate allows interested parties to bring suits in case there’s a dispute in the will. This becomes valuable in cases when there is abuse, elder dementia, forgery, or undue influence at the time of making of the will 

Cons 

• Probate can be expensive 

• The probate process can take a long time, taking into consideration the dockets of the court 

• The heirs or beneficiaries may have to wait some time before receiving their portion of the estate 

• If there is no will, probate will default to intestacy laws. This means that the beneficiaries may not always be the people preferred by the deceased  

• Court actions are public records which could expose the contents of the will to third parties 

Here’s an additional explainer about the pros and cons of probate: 

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Costs of transferring properties 

Skipping probate can help avoid costs associated with the process. Note though that in all cases, the government imposes fees on the transfer of property from one person to another. For example, giving real property as a gift will require donation tax. The costs associated with changing property ownership are always present regardless of the mode. 

Want to know more about how to avoid probate on a house in Ontario? Engaging Lexpert-ranked best estate and personal tax planning lawyers in Ontario can help minimize costs so that the recipients can make the most out of the assets.