Using “dual wills” as part of an estate plan is a well-established and frequently used strategy in Ontario and across Canada. This involves the execution of two wills. A Primary Will that deals with estate assets which cannot be distributed to a testator’s beneficiaries without a Certificate of Appointment of Estate Trustee (formerly “probate”), and a Secondary Will that deals with assets that can be distributed without the requirement of probate, such as shares in private corporations, loans receivable, personal belongings, and real properties subject to the first dealings exemption. To the esteemed readers of AllAboutEstates the use of dual wills for the purpose of probate planning is old hat.  However, while many estate plans include two Wills it is unusual to have a testator with three or even four Wills. This article highlights situations where the use of additional Wills is advantageous.

“Tainting” a Will

The main reason for having multiple wills in Ontario is to avoid probate. Probate includes both the costly and time-consuming probate application process and the payment of Estate Administration Tax (“probate fees”).  In order to avoid the expense of applying for probate and paying probate fees for assets that do not require probate a Supplementary Will can be executed that can be administered without probate. For this to occur however, not a single asset included in a Supplementary Will should require probate in order to be dealt with by the estate trustee. If any financial institution, third party holding a testator’s property, or party purchasing estate assets insists on seeing a Certificate of Appointment of Estate Trustee (“proof of probate”) then the entire Will that spoke to that one asset is “tainted” and will be subject to probate and probate fees.

Valuable Personal Belongings

Some testators own art, jewelry and chattels that are very valuable and pass those assets through a Supplementary Will to avoid paying probate fees on the value of those items. Generally, gifting valuables in kind to family or friends can be done through a Supplementary Will. However, if for example a testator gifts a culturally significant piece of art to a museum through a Supplementary Will and that same Will also gifts valuable jewelry and furniture to their children each beneficiary can receive their gifts without the estate trustee obtaining probate. However, if the museum requires that the Supplementary Will be probated to protect and guarantee their legal ownership of the piece of art and mitigate the risk of being involved in litigation, then the entirety of the Supplementary Will is subject to probate and the value of all assets disposed of through that Will are used in the calculation of probate fees. A possible solution to this problem is having a separate Will that speaks only to the piece of art or other gift that is made to an arm’s length party who may require probate and is not concerned about depleting the estate residue.  Art is not the only example, assets such as rare collections, jewelry, vintage automobiles, boats, horses and even intellectual property often compel parties to require proof of probate.

Risky Businesses

When a testator dies as the sole owner or as the majority shareholder of a private corporation then dealing with the shares of the corporation through a Supplementary Will, outside of probate, is straightforward. Generally, family-owned corporations, medical professional corporations, investment holding corporations or other corporations that are intended to be dissolved upon the testator’s death or the shares are to be transferred in-kind to family members when the testator dies, can be done through a Supplementary Will without the requirement of probate.  However, in a situation where a testator dies and their interest in a private corporation is going to be sold to a third-party purchaser the risk of tainting the Will arises. Such purchasers who are not familiar with the testator or the estate trustee may demand proof of probate before proceeding with the purchase. Once again, by including the interest in a private corporation that is not going to be dissolved or kept in the family or sold to a familiar party should be included in its own Will or in the Primary Will (and paying the associated probate fees), and as a result, interests in other supplementary assets are not tainted.

For example, consider business owner and retired dentist, Dr. Hermey (not his real name).  Dr. Hermey dies with interests in two private corporations including a 100% ownership interest in his own investment holding company that he set up as part of his dental practice as well as a 5% interest in Yukon Drilling Inc. Dr. Hermey is not familiar with the other shareholders of Yukon Drilling Inc. Dr. Hermey has a Secondary Will that deals with all of his interests in private corporations. The shareholder agreement that Dr. Hermey signed with Yukon Drilling Inc. requires probate in order to buy back the shares. As a result, the value of both of Dr. Hermey’s corporations are subject to probate where’s just the value of his interest in Yukon Drilling Inc would be subject to probate if that interest was dealt with in a separate Will.

While there is no limit to the number of Wills a testator can execute there is risk associated with overcomplicating an estate. All Wills should be coordinated parts of an overall estate plan that acknowledge each other and do not revoke, undermine or contradict each other. Using three, four or more Wills is just another strategy for estate planners to keep in their arsenal.

Written by Derek Hambly, Scotiatrust