I Have Multiple Wills. Is There a Problem with Them?
Multiple will plans have been an effective probate avoidance tool for Ontario tax payers since the 1990’s. In a multiple will strategy a will is established for assets that require a Certificate of Appointment of Estate Trustee with a Will (commonly known as “probate”) to be administered by the executor, while a second will is created for the assets that do not attract probate. When it comes time to administer the estate, since the second will does not require probate, the assets dealt with in the second will are exempt from the approximate 1.5% probate fee. In certain circumstances this can represent a substantial tax savings.
The multiple will structure came into vogue during the Rae Days when the provincial government basically tripled probate fee rates in this province. This spawned the adoption of the multiple will strategy and like most tax avoidance plans, the government challenged them. Case law has consistently supported the structure as a legitimate planning tool…until this fall. A recent Superior Court decision has gone against the grain after decades of authority supporting the strategy. This decision has estate planning practitioners aflutter.
A judge struck down a will which he believed gave the executor too much discretion in identifying the specific property which passed through the primary will. The decision has been appealed and the Divisional Court is expected hear that appeal in the New Year. As such, the ruling is in currently stayed and therefore is not to be considered to be binding legal authority until it has sustained the appeal. Whether that actually happens remains to be seen as many legal commentators are quite critical of the decision. Nevertheless, what the Divisional Court thinks of it remains to be seen. If the appeal is successful (or if the appeal is abandoned) the multiple will structure world will need to adjust. In the meantime, multiple wills adopted between now and the appeal likely need to consider this potential change in climate. Even though the case is not yet binding in law, Ontario lawyers need to adapt their multiple wills to adjust to potential applicability of this decision. Stayed tuned because the final chapter in this story has yet to be written.