Planning key to avoiding probate fee ordeal for B.C. executors
By AdvocateDaily.com Staff
A law that requires executors-to-be in British Columbia to pay probate fees when applying for a grant of probate can cause a significant practical problem for those administering valuable estates — but with some advance planning, it is possible to avoid running into these challenges, says Vancouver corporate lawyer Jonathan Reilly.
As Reilly, founder of English Bay Law Corporation explains, the changes, which came into effect five years ago as part of broader amendments to the Wills, Estates and Succession Act, have been a particular concern recently for clients who have not yet confirmed their appointment as executors of large estates.
“The procedure used to be that the executor would give the court an undertaking to pay the probate fees — so you get appointed and you pay later — but the new Act did away with that process. Now you must pay when you apply for probate,” says Reilly, whose firm practises corporate/commercial, real estate and wills and estates law.
“The expectation of the court is that the executor would go out and personally borrow the money to pay the probate fees, but that’s an unreasonable expectation,” he tells AdvocateDaily.com.
Although executors-to-be may turn to the bank holding the estate’s assets to ask them for permission to access funds to pay the probate fees, Reilly says banks often put up a fight in these cases.
“If there’s only a little bit, the banks are more co-operative. When there’s a lot at stake, the banks require all the formalities to be met,” says Reilly.
“If the banks were prepared to be more reasonable in the way they handle these things, then it wouldn’t be such a dire circumstance. One estate that we worked on here — where the amount of money being held for the estate was quite significant, and the probate fee was also substantial but a small proportion of the total value of the estate — it took nearly five months of negotiations with the primary bank before they would finally provide the money to the executors,” he says.
As a result, Reilly says, executors end up stuck in a vicious circle, where the money is there, but they are unable to access the funds to pay the probate fees because their appointment hasn’t been confirmed.
However, Reilly says, lawyers are often able to work with clients to point out these problems in advance and plan for probate fees, making it possible for testators to help their executors avoid the issue.
“The problem tends to arise where there’s been inadequate advance planning. There might be a will, so that part of the planning might be fine, but considering the actual financial requirements of the probate in the estate has not taken place,” for any number of reasons, he says, including denial, an unexpected death or a family dispute.
Once the problem is recognized, says Reilly, often the easiest and best solution is insurance.
“That gets paid out to the executor-to-be on the testator’s death, and the prior purpose of the insurance is to pay for the probate costs,” he says.
Another option is for testators to set funds aside for the executor outside of the estate in a joint account for the purposes of probate fees, Reilly adds.
In situations where advanced planning hasn’t taken place, and probate fees must be paid by the executor, lawyers can help clients to find financing solutions with private lenders, although Reilly cautions that this isn’t a guarantee, and interest rates on borrowed funds are often much higher than those charged by the banks.