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- How to save money with multiple wills -

The Estate Administration Tax (“EAT”) is charged on the value of the estate of a deceased person if an estate certificate is applied for and is issued. The EAT is calculated on the value of all assets owned by the deceased at their date of death, excluding certain assets held in joint tenancy, the value of registered bank accounts with a named beneficiary, real estate owned outside of Ontario and any encumbrances on Ontario real estate.

There is no EAT if the value of the estate is $50,000 or less. For estates valued over $50,000, the EAT will be calculated as $15 for every $1,000 of the value of the estate.
A 1.5% tax might not seem like much, but if a person dies owning a house (and considering the prices of real estate presently in Ontario), their estate will easily be over one million dollars. Assuming their property makes up the largest asset of their estate, $14,250 is payable for EAT on a value of one million dollars. When you calculate funeral costs, capital gains costs (if any), and income tax payable in the person’s last year of death, you will easily see that costs pile up very fast. So why not plan to pay as little EAT as necessary and have the rest distributed to be enjoyed by the beneficiaries?
This is where the multiple wills strategy, an estate planning strategy used to reduce the estate administration taxes, is used by estate planners. Drafting multiple wills is exactly what it sounds like: the solicitor will prepare more wills for one person at the same time – a primary will and a secondary will.

The primary will encompasses assets which must be probated and the secondary will encompasses assets which do not need to be probated. But why is probate needed in the first place? The estate trustee needs to obtain probate to transfer title of the real estate assets, or to have access to the deceased’s bank account to pay debts. Examples of assets which must be probated include real estate, RRSP’s and money held in investments.

However, some assets can be administered without probate: personal effects (like cars, jewellery and art) and shares in private corporations. Therefore, since the assets in this bucket do not need to be probated, one can execute a separate will for them.

The benefit of this estate planning strategy is that any assets captured under a secondary will are not probated, and therefore, they do not carry estate administration tax. Since a will takes between 3-6 months to get probated in Toronto, until which time few estate administration activities take place, the estate trustee will also find it easier and time-efficient to administer the assets under the non-probate will.

Multiple wills are also used in more complex estate planning strategies, such as when one holds assets in separate provinces or separate countries.

While this strategy might be appealing, these wills have to be drafted with quality and care. Here are some errors which can collapse the entire strategy:
- One will should not revoke the other; since a will executed at a later time revokes all prior wills, careful wording has to be included so that the intention to have multiple co-existing wills is clear;
- The assets covered under each will have to be properly defined and categorized, so that there is no overlap of assets between them, otherwise the secondary will risks being probated;
- Each will should clearly define which one of them will pay taxes, debts of the estate, and legacies to avoid difficulty of administration for the executors administering the wills.
This is a popular strategy for small businesses owners to pass on their entire business to their successors while avoiding EAT. If the deceased owner is the sole director/officer of their business (as is usually the case), a new director/officer will need to be appointed and these changes have to be reflected with the appropriate government authority, and new corporate documentation needs to be provided to relevant institutions (such as financial institutions).

A good lawyer will be needed both at the planning stage (to prepare and execute the wills correctly) and at the estate administration stage (to understand the original estate plan and to help administer the estate according to this carefully laid out plan).

If you have any questions about this topic, I would love to help!


Raluca M. Soica, BBA, CPA, CMA, JD
Barrister & Solicitor

Raluca M. Soica, BBA, CPA, CMA, JD    2/8/2021


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