Clara was about to inherit a $1 million estate from her dad. But she was in shock to learn that before she can get that money, she need to come up with $20,000 to pay for immediate costs.
This includes a $14,250.00 Estate Administration Tax, which need to be paid when we submit the probate application, not after the application is approved.
And a standard legal fee of $5000 + HST and approx. $500 in disbursements. This is used to submit a probate without Will application to the Court. Until this application is approved, Clara cannot access the estate funds.
What’s more – because Clara’s dad did not have a Will, the Court may ask Clara to buy a bond insurance costing 5% of the entire estate, which in this case would be $50,000. This is required whenever the Court cannot ascertain who are all the beneficiaries. If Clara’s dad happen to have a spouse or other children unknown to Clara, or if Clara lied about her father being a widow and her being the only child, then the insurance payout can cover such mistakes.
So ideally, when doing estate planning, Clara’s dad should have left her some cash in TFSA, RRSP, or life insurance. When those products have designated beneficiaries, Clara can get those funds within 5-10 business days of her dad’s passing. In comparison, when filing for probate, it takes on average 1-2 years to be approved.
Fortunately, we had solutions to all those problems. First, we asked Clara to check if her father had any TFSA or RRSP with the bank. Turns out he had a small TFSA of $10,000 naming her as designated beneficiary. She was able to use this fund to cover all legal fees and disbursements.
Then, we applied to the bank and asked them to pay the $14,250 Estate Administration Tax (“EAT”) from the deceased father’s bank account. Most banks are extremely unwilling to do this, out of fear of liability and unwillingness to go the extra mile for a stranger like Clara. Banks are often extremely slow to respond and asks for many documents to be signed. But all of those obstacles can be easily cleared with an experienced probate lawyer. In this case, we got the bank to pay EAT within just one week.
In addition, we asked the bank to reimburse Clara for the $30,000 she spent on her father’s funeral by showing them a legitimate receipt from the funeral home.
Lastly, in our application, we submitted multiple documents and motion materials to request the Court to waive the 5% bond insurance. We succeeded! Clara didn’t need to purchase this expensive insurance.
Unfortunately, Clara still has to pay expenses for the upkeep of her father’s estate property. This includes paying for property taxes, cleaning fees, repairs fees, etc. As well, as there is still an outstanding mortgage on title, the bank could take the estate property away for power of sale, if we don’t receive probate approval fast.
Understanding this is putting Clara under considerable stress, we applied for probate within 2 weeks of being hired and receive approval within 3 months! Now, Clara has access to the entire $1 million estate and can finally breath.
She sold the property, paid the outstanding mortgage and the income taxes, and gave herself the rest of the inheritance. We are so happy we helped Clara through the toughest part of her life.
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