Multiple Assets? Ask us about Multiple Wills

By Dominique Pangilinan

“The only certain things in life are death and taxes (–Benjamin Franklin),” so it’s a good idea to start thinking about estate planning. While a single will may be sufficient in the ordinary course, there are some situations—like owning shares in a private corporation—where the use of multiple wills or “Dual Wills” can prevent you from paying more Estate Administration Taxes (“EAT,” or “Probate Taxes”) than necessary. In Ontario, 1.5% of the value of one’s estate is taken in EAT. More specifically, $15 on every $1,000 of assets over $50,000. This can add up, especially when a significant portion of the assets in an estate do not need to be probated. It is important you have a lawyer assist you with your estate planning as payment of EAT may not always necessary.

When an estate trustee (or “executor”) files an application for probate, EAT must be paid to the court. The purpose of probate can be found in the Latin origin of its name probare, which means “to prove.” If the estate neither holds many assets nor deals with third party institutions for instance, there is no such need to prove the validity of the will. But parties such as banks, land registry offices, and pension plans providers, will likely require a probated will to ensure any proceeds are paid out to the proper and legal executor.

The use of Dual Wills allows you to keep some assets out of probate so that only some assets are subject to probate (giving rise to the payment of EAT) while others are not. This was legitimized in the 1998 case, Granovsky Estate where the executor employed this strategy. The executor separated the testator’s assets into (1) assets on which probate would likely be required, worth $3,000,000 (the “Primary Will”) and (2) assets on which probate would not likely be required, worth $25,000,000 (the “Secondary Will”). The executor then submitted the will with the contents of (1) for probate. By doing this, the executor saved the testator’s estate about $400,000 in EAT Taxes.

There are many types of assets that do not require probate, such as corporate shares in privately held corporations, cars, jewelry, life insurance policies with a named beneficiary, etc. Depending on the type of asset you hold and the value of these assets, the use of Dual Wills may or may not be necessary. However, one can see that it was certainly worth it in the case of Granovsky, where the testator’s Secondary Will was comprised of shares held in his private corporations, and it was certainly worth a discussion with their lawyer

Believe it or not, 1998 was over 20 years ago—so is the use of the Dual Wills strategy still viable today? The short answer is yes, but with careful drafting. Recent cases Milne Estate and Panda provide guidelines on this. Stay tuned in our next post for more on that case and how it could apply to your estate.

Do you hold a significant number of shares in a privately held corporation, jointly held property or other valuable goods? The use of Dual Wills may be the right estate planning strategy for you. For more information, please reach out to Amanda Smyth.

This article was prepared with the assistance of Dominique Pangilinan, Articling Student.

This article is not intended to serve as a comprehensive treatment of the topic and is not legal advice. All legal matters are dealt with pursuant to their specific facts and circumstance. Nothing replaces retaining a qualified, competent lawyer.