The majority of people are aware that when we die, legal procedures must be followed, and that these procedures are often complex, time-consuming, and costly. Although it is possible to decrease or remove many of these obstacles by diligent estate planning, the following is a quick overview of the actual expenses connected with the administration of an estate after death.
1. Funeral expenditures
2. Probate Costs
3. Executor Costs
4. Accounting Fees and Taxes; and
5. Legal Costs
What exactly is Probate?
When an individual passes away, their last will and testament must go through probate so that the court may affirm three things: (1) the Will is legitimate, (2) the named executor is authorized to act on behalf of the estate, and (3) the assets in the estate fall under the executor’s control.
There is no legal requirement to probate a Will, but assets registered exclusively in the deceased’s name at death typically need probate before they may be transferred.
Accounting Fees and Estate Taxes:
One of the major obligations of the executor is to guarantee that the decedent’s final tax return is submitted and that all estate taxes are paid. It is imperative that this be completed prior to the transfer of the estate’s assets to the beneficiaries. Executors are personally accountable if the CRA is owed money after the assets have been distributed.
All expenses involved with the deceased’s funeral desires and disposal of remains are estate expenses and must be paid from the estate.
A provincial tax termed as “probate fees” is levied on estates in British Columbia that must go through the probate procedure.
When you select someone to represent you and your estate after your death, they are entitled to compensation for carrying out their responsibilities.
The Trustee Act of British Columbia allows executors to be compensated with a fee of up to 5% of the gross total worth of the estate as well as a modest annual care and administration charge.
In accordance with the Income Tax Act, an executor is required to submit the following tax filings on behalf of the decedent and the estate:
(a) T1 Final Return for the year of the decedent’s death. This is the individual’s personal tax return, not the estate’s. It will span from January 1 of the year of death to the day of death.
b) Rights or Things return. This return is not applicable to all estates. It is a return not included in the T1 return that is submitted when there were sums owed to the deceased individual that had not been paid as of the date of death.
(c) Statement of Trust Income on Form T3. Typically, the executor must also submit a tax return on behalf of the estate. This return’s time frame begins the day following the person’s death and lasts for one year. Most estates are resolved within a year and require just one return, but if they last longer, a return must be filed each year.
All of the decedent’s income in the year of death and any capital gains from “deemed dispose” are included in the estate’s final tax return. When a person dies, they are required by Canadian tax law to sell all of their capital assets at fair market value.
The average cost of a grant of probate is between $2,500 and $5,000 (not including taxes and disbursements for the estate). Depending on the quantity and length of unanticipated situations, legal costs may exceed average range.
Probate, settling the estate’s obligations and taxes, and finally distributing the assets to beneficiaries may all take months, if not years.
In summary, the process of administering an estate may take months, if not years, and result in thousands of dollars in costs for the estate. Estate administration may be simplified and streamlined by proper preparation, cutting down on or even eliminating many of the fees and expenditures that would otherwise be incurred.
It is always essential to seek expert counsel and secure your family’s financial future. The team at Sodagar & Company has substantial estate planning experience. We recognize that such concerns might be challenging to contemplate. Access our will questionnaire by clicking here and become acquainted with the data we need to get your affairs in order.