|Sursa dumneavoastr` de Estates si Real Estate Law - USING MULTIPLE WILLS IN ESTATE PLANNING|
The Multiple Wills strategy was successfully used for over two decades in Ontario for the purpose of minimizing the estate administration tax (“EAT”) on probate. The EAT is calculated at 1.5% for values over $50,000.00, and it can mean significant savings for larger value estates. It is a popular strategy used by solicitors to account for the evolution of the law and their clients’ state of affairs.
As the main reason probate was required in the first place was because it was demanded by third parties (financial institutions, the Land Titles office, etc.) and due to a small inconsistency in the law, the Multiple Wills strategy was developed to account for assets where third parties did not require probate. This strategy was first approved by an Ontario court in 1998 and has been successfully used to reduce EAT for estates until a 2018 Ontario Superior Court decision which shocked Ontario solicitors.
In Milne Estate (Re), Justice Dunphy took the position that “a will is a trust”. Since one of the requirements of a trust is “certainty of subject matter” (i.e. certainty regarding the assets subject to probate) this meant that Justice Dunphy took issue with the use of a clause for allocating assets between two wills which allowed executors to move assets from one will to the other and vice versa, for purposes of reducing EAT at probate. This meant that it was not clear what assets belonged to which will, there was no “certainty of subject matter”, and therefore the trust did not exist and ALL the assets had to be probated (including those in the Secondary Will). While this decision caused a lot of panic, it was thankfully appealed and reversed at the Divisional Court in 2019.
A Multiple Wills strategy is currently creatively used for several different purposes:
1. Personal Effects
For clients who have expensive household and personal effects (such as art, jewelry and cars), a Multiple Wills strategy might work to help reduce EAT by placing these items in the Secondary Will which is not to be probated.
2. Owning significant investments
For clients who have significant investments, I work together with their tax accountant and investment advisor to put in place a strategy whereby the investments will be covered by the client’s secondary will, and this will be separate from all other assets covered by primary will. This strategy involves the separation of legal and beneficial title: a new corporation is created which holds legal title to the investments through a bare trust while the individual person maintains their beneficial title in the investments. This works because corporations are their own entity but the individual person will control the corporation as the sole shareholder, officer and director.
3. Owning a business
Where the business is incorporated and its shares are not publicly traded, there is an option to place the entire value of the business in the secondary will. This is because the business’ directors are well acquainted with the deceased owner and it is very likely they are aware of the owner’s death. In many cases, the directors are the owner’s relatives; in such an intimate setting, it makes no sense to demand probate.
4. Owning foreign property
Owning foreign real estate property (a condo in Florida or a home in Romania, for example) can cause many difficulties for the poor executor in charge of the estate administration. This is because both Ontario and the foreign country have completely different processes for handling the estate administration. One of the difficulties with using only one will only which covers worldwide property is that Ontario will require the original will for probate. The foreign country will likely also require the original will for their own estate administration process. So then, which country gets priority over the original will? Often times, probate will have to be done in one country and then “re-sealed” in the second country. This involves double legal fees and double headaches for the executors.
The use of a Multiple Wills in this scenario would save the day, but the planning must be done very meticulously between the Ontario solicitor and the foreign solicitor to ensure the will which was signed last will not revoke the earlier will.
If you think a Multiple Wills strategy makes sense in your case, I would love to help!
PLEASE NOTE THAT THE CONTENT OF THIS BLOG IS MERELY FOR INFORMATION PURPOSES AND DOES NOT CONSTITUTE LEGAL ADVICE.
Raluca M. Soica, BBA, CPA, CMA, JD
Barrister & Solicitor
Raluca M. Soica, BBA, CPA, CMA, JD 7/12/2021