Assets That Avoid Probate in Ontario: What Passes Outside the Estate

An executor often discovers that not everything the deceased owned flows through the will. Some assets go straight to a named person or a surviving owner, without a court grant.

This article explains the main categories, how a later will can affect a designation, and why assets outside the estate can still matter. A lawyer can confirm how the rules apply to your file.

Which assets pass outside the estate

Some assets pass outside the estate, by joint ownership with survivorship or to a designated beneficiary. Probate is usually needed for real property that does not pass by survivorship and for assets held by financial institutions.

• Property held jointly with a right of survivorship, which goes to the surviving owner.
• Assets with a named beneficiary, such as life insurance or registered plans.
• Plan benefits such as an RRSP, RRIF or pension, where the participant designated a person to receive the benefit.

Beneficiary designations on plans

Under the Succession Law Reform Act, a participant may designate a person to receive a benefit payable under a plan, such as an RRSP, RRIF or pension, on their death. They may do so by a signed instrument or by will.

A later will does not automatically cancel an earlier designation. A revocation in a will revokes an earlier designation made by instrument only if it relates expressly to the designation. An executor should therefore check the plan paperwork rather than assume the will controls.

Joint accounts need care

A joint account is not always a simple survivorship asset. A gratuitous transfer from a parent to an adult child, including into a joint account, is presumed to be held on a resulting trust for the parent's estate, though this can be rebutted by evidence of an intended gift.

For a transfer to a minor child, the starting point is instead a gift. If you are unsure whether an account belongs in the estate, hold the funds and get advice before distributing.

When a joint account is disputed, courts look at the evidence of what the parent intended at the time of the transfer. Evidence they weigh includes:

• Later statements of intention.
• The wording of the bank documents.
• Who controlled and used the funds.
• Any power of attorney.
• How the account was treated for tax.

Why these assets can still matter

Assets outside the estate are not always outside the dispute. For a dependant's support claim, the Succession Law Reform Act treats non-estate assets as part of the estate. These include money in a joint account with another person, property held in joint tenancy, life insurance owned by the deceased, and amounts payable under a beneficiary designation. This treatment applies to that support claim, not to ordinary distribution.

Size also affects the process. No Estate Administration Tax is payable on estates worth $50,000 or less, for applications made on or after January 1, 2020. Since April 1, 2021, a small estate for probate purposes is one worth $150,000 or less. How assets outside the estate are counted toward either figure depends on your situation, so it is worth confirming with a lawyer or accountant before you rely on one category or the other.

Filing duties continue even when little tax is owed. An Estate Information Return must be filed with the Ministry of Finance within 180 calendar days after the estate certificate is issued, even if the estate is worth $0. This includes small estates with a Small Estate Certificate. No return is required for certain succeeding estate trustee certificates or a Certificate of Appointment of Estate Trustee During Litigation.

Income tax is a separate question. A person is deemed to have disposed of each capital property immediately before death at its fair market value, and any resulting capital gain is reported on the final return. Property that passes to a spouse, common-law partner or qualifying spousal trust can roll over at cost if it vests indefeasibly within 36 months after death, and the representative may elect out. A representative who distributes estate assets without a CRA clearance certificate while tax is owing is personally liable for the unpaid amounts, up to the value of the assets distributed.

What to do next

• List every asset and note how it is held: sole name, joint, or with a named beneficiary.
• Collect plan and insurance paperwork showing any designation.
• Check whether a later will mentions an earlier designation expressly.
• Flag joint accounts opened with an adult child for closer review.
• Check whether a dependant may have a support claim before distributing.
• Ask a lawyer to confirm which assets need a certificate and which do not.

Frequently asked questions