Multiple Will Mishap

INTRODUCTION

A recent decision from the Ontario Superior Court of Justice, Gordon v. Gordon et al., 2022 ONSC 550 (“Gordon”) shines a caution light on the importance of prudent drafting when undertaking multiple Will planning. Multiple Wills can provide an estate with significant savings in estate administration tax (“probate tax”) when the Wills are properly drafted. By the same token, a simple drafting error in the Wills can potentially botch the entire strategy, costing the estate more in the end rather than less.

PROBATE TAX AND THE MULTIPLE WILL STRATEGY

Multiple Wills are a common estate planning tool in Ontario to save on probate tax. Probate tax is the tax paid into court in exchange for a Certificate of Appointment of Estate Trustee (“Certificate of Appointment”), which legitimizes the executor's authority to administer the assets of the estate. In Ontario, probate tax is levied at the rate of 1.5% on estates worth above $50,000.[1] Third parties, such as financial institutions in the case of bank or investment accounts, and the Land Registry Office in the case of real estate, often require a probated Will before they will agree to transfer those assets of the deceased into the hands of the executor.

Certain assets, such as personal effects (household furniture, jewellery, and so on) or shares in private corporations, tend not to require the involvement of third parties for the executor to gain possession of and administer the asset.[2] Such assets can be “carved out” and dealt with under a "Secondary Will" while assets tending to require probate can be dealt with under the "Primary Will".[3] Carving assets out via the Secondary Will reduces the value of estate assets submitted for probate (on which value probate tax is applied), thereby reducing the overall probate tax payable by the estate.