Why Would You Need Two Wills?
Most Estate planning strategies to reduce taxes payable on one’s death involve avoiding Probate. Probate – known formally in Ontario as a Certificate of Appointment of Estate Trustee – is the process whereby the Court certifies the Will of the deceased and the appointment of the Estate Trustee. Estate administration tax (i.e., Probate fees) of approximately 1.5% of the value of the deceased’s Estate and are payable during the certification process. While this may seem, a modest sum compared to other taxes, for individuals whose assets include valuable shares of a privately held corporation it is worthwhile doing some planning to avoid this tax altogether. And it can be achieved by the addition of a Secondary Will to your Estate Planning process.
(Incidentally, no Will means all assets are subject to Probate fees not just some assets: a waste of money). Without proper planning in Ontario, Probate can be required to cover:
• Real Estate in Ontario.
• Bank accounts (includes foreign banks)
• Shares, bonds, trust units, options, mutual funds, TFSAs, RRSPs, RRIFs.
• Vehicles such as cars, trucks, boats, motorcycles, trailers situated in or outside Ontario.
• Goods or material.
• Business property & interests, including private company shares,
Savvy individuals can avoid this problem through the use of multiple Wills and proper drafting, along with the naming of beneficiaries on financial and insurance products.
The use of multiple Wills received judicial approval in Ontario in 1998. At the time the Court considered a Testator’s use of two Wills: a ‘Primary Will’ and a ‘Secondary Will’. The Secondary Will exclusively governed the Testator’s private company shares, amounts owing to the Testator from said companies, and assets held in trust for the Testator by said companies. In other words, the secondary Estate consisted solely of those assets that the Estate Trustee could transfer or liquidate without needing Probate.
Until January of 2015, the application for letters Probate required two subtotals (one for personal property and one for real property) and their sum, which gave the total value of an Estate. The change that came into effect in Ontario in January 2015, now requiring an applicant to itemize the value of all the component parts of an Estate, may have increased the accuracy of the stated value of an Estate. However, it has also resulted in some ineffective and unfortunate results. Some Executors, now faced with the necessity of valuing all Estate items, have no choice but to spend more to value certain items than those items may be worth.
Ontario has witnessed a marked increase in the popularity of multiple Wills as a method for effective Estate planning. Complementary to the reduced tax liability are the added benefits of ease of administration of one’s Estate and privacy, as a Probated Will is a public document. These combined benefits make preparing multiple Wills a prudent investment for the common-sense business owner.
Justice Ontario Laws for Wills & Trusts
Read more about a Financial Planner’s Perspective on Estate Planning
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This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.