The Benefits of Multiple Wills for Business Owners: Primary and Secondary Wills Explained
Jul 5, 2018
It is said that in this world, nothing is certain but death and taxes. Modern estate planning aims to assist individuals to navigate both of these unpleasant certainties. 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 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.
Probate is required in select circumstances, and when it is required for the estate trustee to effectively deal with one asset in a will then all assets governed by that will must be probated. In that event, the estate will be required to pay the estate administration tax on the combined value of all assets governed by the will. Savvy individuals can avoid this problem through the use of multiple wills and proper drafting.
The use of multiple wills received judicial approval in Ontario in Granovsky Estate v. Ontario, 1998 CanLII 14913 (ON SC). Therein the court considered the 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 deal without needing probate. Whereas the Primary Will governed all of the testator’s other assets, for which probate was required. The court in Granovsky found that there was no prohibition in the applicable legislation which could prevent a testator from having both a primary and secondary will – a testator may plan his or her estate as she or he sees fit. Notably, the court held that there was no requirement to submit the Secondary Will to probate or pay the estate administration tax on the value of the assets governed by the Secondary Will.
Following Granovsky, Ontario has witnessed a marked increase in the popularity of multiple wills as a method for effective estate planning. Complimentary 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.