The Cottage, the Will, and the Probate Bill
Eleanor, 74, widowed, has three adult children. Her estate: principal residence $900,000 (joint tenancy with her son Peter, who lives there and pays no rent), cottage $650,000 (sole ownership), investment portfolio $800,000 in a non-registered account with a named beneficiary designation to her daughter Anna, RRIF $400,000 with no beneficiary, and $250,000 cash. Her will, drafted in 2011, leaves everything to the three children equally and names her daughter Anna as executor. Peter has a disability and receives means-tested provincial benefits. Eleanor wants the cottage to stay in the family and is worried about probate fees, which in her province run roughly 1.5% of estate value.
1. Identify the estate-planning failures in the current arrangement and rank them by consequence.
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First, the joint tenancy with Peter on the principal residence creates a presumption of resulting trust: without documented intent to gift, the entire $900,000 may be deemed held on trust for the estate, defeating the probate saving and exposing the home to estate claims. It also risks Peter's means-tested benefits, since the home is an asset he may be treated as owning. This is the largest exposure.
Second, the beneficiary designation to Anna on $800,000, combined with Anna as executor and equal-split will, creates an unequal inheritance and a likely claim by the other children. The 2011 will predates the designation and may not reflect Eleanor's intent.
Third, the RRIF with no beneficiary passes through the estate, attracting probate on $400,000 and exposing it to creditors and delay.
Fourth, the cottage as sole-owned property attracts probate and cannot be kept in the family without a co-ownership or trust structure. Probate at 1.5% on roughly $2.15M of probate-able assets is about $32,000 - significant but a secondary concern against the trust and fairness issues.
2. Eleanor insists the joint tenancy stays because 'it avoids probate.' What do you tell her, and what alternatives do you propose?
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Explain that probate avoidance is not a goal in itself: the fee saved on $900,000 at 1.5% is about $13,500, while the resulting-trust risk could cost the estate the entire $900,000 in litigation and could disqualify Peter from benefits worth far more over his lifetime.
If the intent is to keep Peter housed, alternatives include: (1) a life interest in the home for Peter with the residue to all three children, using a trust; (2) a discretionary trust for Peter's housing needs with an independent trustee, structured so benefits are preserved; (3) selling or transferring the home to a properly documented trust with a promissory note or gift declaration that rebuts the resulting trust. Each requires a lawyer and a benefits eligibility review.
For the RRIF, add a beneficiary designation or a successor annuitant to avoid probate. For the cottage, consider adding the children as tenants in common with a co-ownership agreement, or a cottage trust, accepting probate as the price of clarity. Coordinate the will, designations, and title so all three children receive equal value.