UPDATE: If you have Multiple Wills, they should be reviewed
The law in Ontario since 1998 is that one person having multiple wills is an effective means of estate planning and avoiding or minimizing probate fees (also known as Estate Administration Tax). The problem is that a decision made on September 11, 2018, brings into question the validity of multiple wills.
UPDATE: The September 11, 2018, decision of the Superior Court was appealled. On January 24, 2019, the Divisional Court allowed the appeal and found that the multiple wills of the Milnes were valid and their Primary Wills could be admitted to probate.
This is good news for those of our clients who have used multiple Wills as a means of estate planning and avoiding or minimizing probate fees (also known as Estate Administration Tax).
BACKGROUND
In Ontario, when a Will is filed with the Court for probate, the Province charges a tax equal to approximately 1.5% of the value of the assets. Ontario rate is the highest rate of all jurisdictions in Canada.Probate is the process of proving that a Will is valid. In Ontario, when probate is granted, the Court issues a Certificate of Appointment of Estate Trustee. There is no legal requirement in Ontario for a Will to be probated. A certificate issued by the Court gives proof that the Estate Trustee has the power to deal with the estate. Without probate, parties can refuse to deal with the Estate Trustee and demand a probated Will.
In 1998, the Courts in Ontario recognized the validity of an individual executing multiple Wills, each dealing with a separate pool of assets. The concept involves executing two or more Wills. One of the Wills, often called the “Secondary Will” deals with the assets that one expects will not need a probated Will to administer. The other Will, often called the “Primary Will” deals with the assets that one expects will need probate.
The effect is that if only the Primary Will needs probate, then the Estate Administration Tax is only paid on the value of those assets. The tax is thus avoided with respect to the assets referred to in the Secondary Will. The assets included in the Secondary Will can often have high values and can include motor vehicles, certain land, and interests in private corporations among others. On a house worth $1 million, that can be a $15,000 reduction in tax.
Aside from the potential tax savings, there are other benefits to executing multiple Wills. However, there are downsides too, including: the cost of preparation and it may increase complexity.
WHAT HAPPENED ON SEPTEMBER 11, 2018
When drafting multiple Wills, is it common to describe the pools of assets that fall under each Will using general descriptions. You cannot know for certain what you will own when you die – investments change, property is bought, property is sold, etc.
In the Milne Estates, a husband and wife both executed multiple Wills. Unfortunately, they also both died in October 2017. Their respective Estate Trustees then applied to the Superior Court for probate of each of the Primary Wills. On September 11, 2018, a Judge of the Superior Court of Ontario issued a judgment deciding that neither of the Primary Wills were valid. However, the Judge did find that both of the Secondary Wills were valid.
From 1998 until now, hundreds of Primary Wills that used language similar to that used by the Milne’s have been admitted to probate. Whether the decision in Milnes’ estates is an abberation is yet to be seen. The concern for estate lawyers is that unless that decision in Milne is overturned or varied, it is possible that many Primary and Secondary Will are invalid.
Although this decision may invalidate one or the other or all of a person’s multiple wills, the decision did not change that multiple wills are a legal and effective means of avoiding or minimizing Estate Administration Tax.
WHAT DO YOU NEED TO DO?
If you have executed multiple wills, then arrange to meet with an experienced estates lawyer to have your multiple wills reviewed to see if this change in the law negatively affects your wills. The risk of doing nothing may be too great.
If you do not have multiple wills, then arrange to meet with an experienced estates lawyer to determine whether executing multiple wills will be of benefit to you and your estate. No one wants to pay more in taxes than they have to.