How Property Passes on Death

Strategically Navigate Asset Distribution with Trusted Wills and Estate Planning Lawyers

A Will is a cornerstone document in any estate planning, but it is important to realize that a Will does not necessarily operate to distribute all of a deceased’s property. Some property is distributed by other means – e.g., by ‘operation of law’ – and is therefore transferred outside of the estate. 

To simplify:

Property Passing Within the Estate

• This is the property that is distributed by the terms of the deceased’s Will or, if the deceased dies without a Will, by the scheme of intestacy under wills and estates legislation. 
• These are assets that are solely owned by an individual and that do not have designated beneficiaries.
• Some common examples of such solely-owned assets are:
  • vehicles registered in a single name;
  • personal bank and investment accounts;
  • real property held with others as ‘tenants in common’;
  • a solely-owned business enterprise.
• Even assets with a designated beneficiary (e.g., an RRSP) can pass within the estate, if no beneficiary was properly designated, if the beneficiary did not survive the deceased, or if the estate itself is named as the beneficiary.
• Assets owned by a deceased’s company are not property of the deceased and can’t be directly gifted under a Will.  While it is possible to gift the shares of the company, assets that the company may own (e.g., a piece of land) cannot be directly gifted.
• Property within the estate must be included in probate application materials, and the British Columbia probate fee is calculated on the value of that property.

Property Transferring Outside the Estate

• This is property that transfers directly to others – for example, to a co-owner or to a designated beneficiary.
• Some common examples of property transferred outside the estate are:
  • real property held in joint tenancy (such as a home);
  • jointly-held bank accounts;
  • life insurance proceed with a surviving, properly-designated beneficiary;
  • registered plan proceeds (RRSP, RRIF, TSFA) with a surviving, properly-designated beneficiary;
  • Property subject to contractual obligations that limit the deceased’s right to transfer the property (e.g., shares in a private company many have restrictions on transfer set out in the shareholders’ agreement).
• Many spouses hold assets jointly and/or have designated the other as the beneficiary on registered accounts. These would then become the property of the surviving spouse directly.
• Property that transfers outside the estate is not included in the probate application materials and therefore there is no B.C. probate fee payable on its value.  
• Property transferring outside the estate is also protected from claims of creditors and others that might otherwise be made against the deceased’s assets.

Conclusion

To conclude, it is important to understand that there are different consequences on how property is distributed depending upon its type and how it is owned. While a Will may operate to distribute some assets, often many assets will be transferred to others without regard to the provisions of the Will. Knowing how property is or could be distributed on death is a key factor in determining the best choices and creating the right estate plan for an individual’s particular circumstances.

* This information is for general illustration only and is not legal advice.

Peter Bonny

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