How do your loved ones get ownership of your assets after you die?

When you die, how does ownership of your assets transfer to your beneficiaries?

With or without a Will, if you own certain types of assets in your name alone (such as real estate or a bank account), your beneficiaries (the ones you want to get your assets) will have to prove that they should legally be able to give instructions to the proper authority about that asset. In Ontario, this proof is a court order called a Certificate of Appointment of Estate Trustee (CAET). Many people may be familiar with this court order under one of its older names – a grant of probate or letters of administration. These types of assets are said to “trigger probate” because without the CAET court order, you can’t change the legal title to these assets.

Prepare your Will now

For example, imagine Barbie is only person with her name on a bank account when she passes away. Ken goes to the bank with Barbie’s Will and says “Look, Barbie gave me this bank account.” The bank will say “Why should I give you information about this account or pay any of Barbie’s bills or transfer any money to you? You aren’t Barbie and I can only do what Barbie says because she’s legally the only owner and because of privacy legislation.” This can create a huge problem with matters such as bills and funeral expenses.

In this case, Barbie took care of things and had a Will naming Ken as her estate trustee, as well as the only heir to her estate – that is to say, Ken is both the estate trustee named in the Will and the sole beneficiary of Barbie’s estate. Ken can then take the will to a lawyer, who will help him apply to court to get a CAET. Ken can then take this CAET to the bank to show that he legally stands in Barbie’s shoes and he is entitled to the money in the account. The bank will say “We recognize you as Barbie’s legal representative and now we’ll follow your instructions as though you are Barbie.”

This example illustrates why you often need a CAET and how to get one. A lawyer can assist you with filing an application for CAET either with or without a Will. Where there is no Will naming an estate trustee, provincial law determines who in the deceased’s family has the right to apply for a CAET, and in what order of priority. Unfortunately, under this scenario, the person who ends up being the estate trustee (the legal representative of the deceased) or gets the assets may not be someone the deceased would have chosen.

Total fair market value

The point is – prepare your Will now. It’s too late when you are dead.

A large part of the application is reporting the total fair market value (TFMV) of the estate. Estate Administration Tax (formerly probate fees) is calculated on the TFMV using a formula. The estate trustee is personally financially responsible for reporting the total value of the estate accurately. And filing an Estate Information Return. This return can be audited by the ministry of finance, and errors or omissions are subject to late fees, penalties and a prison term of up to two years for truly fraudulent reporting, so it is imperative to have your lawyer or accountant help you.

In summary, a CAET is the proof required to sell, transfer or otherwise deal with certain types of assets. These assets are usually things that are registered and regulated by government, such as bank accounts and ownership of real estate, but not always. If you would like to make it possible for your loved one(s) of choice to administer your estate and transfer your property after you die, getting a professionally prepared Will is an important planning step. Hiring a lawyer who has experience in filing court applications for CAET is an equally important decision made by your selected estate trustee, since the applications are very detailed and legal advice is crucial.