Manitoba Eliminates Probate Fees: Considerations for Future Planning

Elimination of Probate Fees in Manitoba

Probate fees were eliminated in Manitoba as of November 6, 2020. Accordingly, requests for probate, administration, or resealing in Manitoba no longer require payment of a probate fee (previously, $70 for the first $10,000 of an estate, and $7 for every additional $1,000 or fraction thereof). The applicable legislation, now renamed The Court Services Fees Act (Manitoba), still maintains that the Court may charge a processing fee for such requests; however, the fee would need to be prescribed by regulation and is expected to be nominal.

Pitfalls of Probate Planning

Probate planning has been a common element of estate planning, in which the ownership of assets is structured to reduce or avoid probate fee exposure. However, improper planning (notably through joint ownership and beneficiary designations) can lead to a gap (not bridged by any clear terms of trust) between the recipient of an asset and the asset’s intended beneficiaries. Accordingly, in an effort to save on probate fees, families have occasionally stumbled into years of costly litigation.

Joint Ownership

Since the decision in Pecore v. Pecore, 2007 SCC 17, the law has been clear that there is a presumption of a resulting trust when a parent gratuitously transfers ownership of an asset into joint ownership with an adult independent child; however, the presumption can be rebutted if the child transferee can prove that a gift was intended.

Notwithstanding the decision in Pecore, it is still relatively common for an older parent to hold one or more bank accounts jointly with an adult child in an effort to avoid probate fees. The intent of the parent in establishing this joint ownership continues to be litigated because the transferee child may be reluctant to part with an asset of which he or she is the nominal owner (see, for example, Taran v. Ellison Estate, 2019 MBQB 154, and Sawchuk Estate v. Evans et al., 2012 MBQB 82).

Transfer of real property by a parent into joint ownership with an adult child has also occasionally resulted in harsh unintended consequences for the transferor parent. For example,

  • the parent may be unable to undo a gift of joint tenancy to the child once it has been duly made (see, for example, Boda Estate v. Boda, 2014 BCCA 354); and
  • the child’s interest in the real property may become subject to a claim by his or her creditors, even while the transferor parent is alive and even though the transferee child contributed no value to the property and is unaware of the transfer (see, for example, Gauthier Estate v. Gauthier, 2012 MBQB 101).

Beneficiary Designations

Beneficiary designations can also lead to strange results when they do not evolve with changing circumstances. Marriage generally revokes a will in Manitoba, unless the will was made in contemplation of marriage (see The Wills Act, sections 16 and 17); however, it does not revoke a beneficiary designation (see The Beneficiary Designation Act (Retirement, Savings and Other Plans), section 13). Similarly, although divorce revokes a gift made in a will to a spouse (see The Wills Act, section 18(2)), it does not revoke a beneficiary designation made in favour of the same beneficiary (see The Beneficiary Designation Act (Retirement, Savings and Other Plans), section 13; and, for example, Klassen Estate v. Klassen (1998) 131 Man. R. (2d) 158 (MBCA)).

A parent may name an adult child as the executor of her estate and the beneficiary of an insurance policy or registered account, with the expectation that the child will carry out the wishes articulated in her will; however, the child may perceive his entitlement as beneficiary of the policy or the account less considerately and act to the detriment of another sibling who the parent also intended to benefit (see, for example, Dreger (Litigation Guardian of) v. Dreger, [1994] M.J. No. 520 (MBCA)).

We hope that given the elimination of probate fees in Manitoba, probate planning through joint ownership or beneficiary designations is undertaken more carefully, and undue confusion and litigation are avoided.

Why Plan for Probate in the Absence of Probate Fees?

Despite the elimination of probate fees in Manitoba, probate planning remains useful in particular circumstances, such as the following:

  • Creditor protection. Section 173(2) of The Insurance Act exempts an insurance contract from execution or seizure while a beneficiary “designation is in effect in favour of a spouse or common-law partner, child, grandchild or parent, or any of them, of a person whose life is insured.” It also exempts any insurance money payable to a designated beneficiary on the death of the insured from “claims of the creditors of the insured” (see The Insurance Act, section 173(1)). Accordingly, if a person anticipates having significant exposure to creditors (including exposure pursuant to a contingent liability, such as a guarantee for the loans of a business venture), it is important to ensure that beneficiaries are duly designated for any personally held insurance policies (if necessary, by means of an insurance trust declaration to provide appropriately for any minor, disabled, or spendthrift beneficiaries).
  • Land transfer tax planning. Under section 112(1) of The Tax Administration and Miscellaneous Taxes Act (TAMTA), land transfer taxes are usually payable when real property is transferred in kind by an estate to a beneficiary, although exemptions apply to certain transfers of farmland (TAMTA section 113(1), transfers of non-commercial property by an executor or administrator of a person’s estate to the person’s spouse or common-law partner (TAMTA section 114(1)(e)), and transfers to charities (TAMTA section 113(2)(b)). Consideration should continue to be given to corporate ownership of real property (whether by means of a bare trustee or otherwise) in order to limit land transfer tax exposure, when appropriate.
  • Alter ego and joint partner trusts. Alter ego and joint partner trusts remain viable will substitutes for maintaining confidentiality, limiting the possibility of a dependant’s relief claim, and reducing probate fee exposure with respect to a person’s assets in other provinces.
  • Multiple wills. Multiple wills have been successfully used as a probate planning technique in Manitoba, starting with The Estate of Robert Parrish Spear (PR 14-01-99254) where the Court issued a grant of probate limited to Mr. Spear’s primary estate on or about August 17, 2015. Subsequently, Manitoba courts have issued grants of probate limited to the primary estate subject to service of the filings on the attorney general, and the office of the attorney general confirming in writing that it either consents to the grant, takes no position with respect to it, or does not object to the grant. In the absence of a probate fee levy, the Court may no longer require confirmation of the attorney general’s position with respect to such requests in the future. Multiple wills remain a consideration when estate planning for clients with corporate interests, such as those who desire confidentiality and want to prevent public disclosure of business information, or those who have assets in or may move to jurisdictions such as Ontario or British Columbia, where they will experience more probate fee exposure.

If you have questions with respect to the foregoing or, otherwise, require assistance with your estate planning or administration, please do not hesitate to contact our Winnipeg Estate Planning and Administration group.

This article first appeared in STEP Insidea publication of The Society of Trust and Estate Practitioners. 

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.