As professionals progress in their careers, the estate planning process may become quite complex. The development of a clear estate plan is critical to ensure that the intentions of the testator are honoured, while dealing with the estate in the most tax efficient manner. Many business owners, including professionals, can benefit from various strategies intended to reduce or avoid probate fees, or estate administration tax. One of these strategies involves the creation of dual Wills in order to deal with various assets.
When a person dies in Ontario, it is necessary for the estate trustee to apply for a certificate of appointment of estate trustee with a Will, and the estate is usually subject to probate prior to the transfer of assets to beneficiaries. However, not all assets require probate before being transferred to beneficiaries.
Since the majority of professionals practice through a professional corporation, it may be advisable to have dual Wills, which is an effective estate planning strategy used to protect certain eligible assets from probate. This strategy has been commonly used where an individual holds shares of a professional corporation because shares in a private corporation do not commonly attract a requirement for probate. Engaging dual Will strategy allows for the creation of a secondary Will with respect to the shares and shareholder loans of the professional corporation to ensure that the professional corporation, as well as other eligible assets, are protected from estate administration tax, which would not be the case if only one Will was used. The benefit of dual Will strategy is quite desirable for professionals who practice through a professional corporation, especially as over time a significant portion of the professional’s net worth may be held by the professional corporation.
Dual Will strategy involves separating your assets so that they fall under different Wills. A primary Will deals with assets that require probate such as real estate and bank accounts, while the secondary Will may deal with the remaining assets that do not require probate such as privately held shares, or personal effects such as art and jewelry. Separating assets requiring probate from those that do not is a strategy that may significantly reduce the probate fees that the estate would otherwise be required to pay.
Successful implementation of dual Wills
Dual Will strategy is appealing for many reasons, but the drafting of Wills in this manner can be very complex. It is very important to seek legal advice regarding dual Wills because if they are not drafted properly, or if ambiguous or conflicting language is used, the Wills may end up revoking one another. It is very important that the Wills are worded in such a way that clearly demonstrates the intention of both Wills co-existing.
The Wills must also clearly identify the property and assets that each Will shall deal with. Otherwise, this may create a situation in which both Wills deal with the same property but in different ways, and this Will cause difficulties with respect to the administration of the estate.
Another key consideration for the successful implementation of dual Wills is to ensure that the appropriate assets are included under each Will. If an asset requiring probate is included under the secondary Will, all of the assets under the secondary Will being subject to estate administration tax.