The medical concerns about the Covid-19 virus have started many people thinking about estate planning, particularly wills. Last time, I looked at a couple of tax-saving strategies when preparing a will. In this article, I'll look at two other important will-planning strategies to consider, probate planning and RRSP/RRIF planning. 

Probate planning

Probate fees are levied on the estate by the province of the deceased's residence. They are set at a specific dollar or percentage amount of the estate's assets, with fees generally increasing in tiered amounts. In Ontario, for example, no Ontario Estate Administration Tax (which is their term for the probate fee) is levied on estates value at less than $50,000. For an estate valued at over $50,000, the the tax is levied at $15 per $1,000, or 1.5% of the total value of the estate.

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 know 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 primary will. Note: Your Secondary Will can also deal with other assets that would not normally require a probated will, such as loan receivables, jewellery, art, or other personal assets.

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, and the shares of such bare trustee company 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.


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.

Not only will this avoid probate fees, but if you designate your spouse as a beneficiary, the value of your RRSP or RRIF will not be included as income on your final return as 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 low tax rate of the child or grandchild. Note that 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 disabled.

"Financially dependent" usually means that the child or grandchild's income does not exceed the basic personal amount. 

Consider, too, that if you own income- and non-income-earning assets, it is possible to leave the income-earning assets to children with low income. This is because income from bequests to high-income children will, of course, be added to their other taxable income, thus resulting in a significant tax exposure.

You could also leave your residence to a beneficiary who will be able to claim the principal residence exemption.

And 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 rules.

Consult your lawyer when preparing a will using these strategies. By properly tax planning your will, you can at least take comfort that upon your death, you will be leaving a larger inheritance to your family, and less to the taxman. 

Originally Published by The Fund Library, April 2021

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.