Probate Savings Strategis: Tips and Traps Part III – Multiple Wills
Probate of a Will is not necessary to transfer the following specific assets:
- shares of or debts owing from privately held corporations;
- personal effects;
- real property registered in the Land Registry system of Ontario; and
- real property registered in the Land Titles system of Ontario when the estate value is $50,000 or less or on a first registration after conversion into Land Titles.
The use of multiple wills can eliminate probate fees on assets that do not require a probated Will for their administration. The strategy involves the preparation of two wills, a Primary Will or Public Will which is submitted to probate, and a Secondary Will or Private Will, which is not submitted to probate. The Secondary Will deals only with the assets listed above, which do not require a probated Will for their administration, and the Primary Will deals with all other assets. On death, probate is obtained of the Primary Will only, saving probate fees on the assets governed by the Secondary Will.
This strategy works well but careful drafting is important to ensure, among other things, that the Secondary Will does not revoke the Primary Will and that there is power given the Executors of the Secondary Will to disclaim any assets that may taint the Secondary Will.
If multiple will are used because the assets include shares in privately held corporations, additional probate saving strategies can be utilized.
Where such a corporation exists already, registered title of certain assets can be transferred into the name of the private company which is to act as bare trustee of the assets. The owner retains beneficial title to the asset and an appropriate Nominee Agreement is executed along with the transfer of the registered title only of the asset. This strategy eliminates probate fees on those assets, provided the beneficial interest retained by the owner is governed by the Secondary Will. There are no income tax consequences of the transfer provided that it is clearly documented as a transfer of registered title only.
Assuming all other consequences of transfer into joint ownership are positive, the transfer of assets into joint ownership in conjunction with the use of a Declaration of Trust and multiple wills can eliminate the probate fees on the asset transferred. The transfer would be done on the basis that the property is held in trust for the parent and a Declaration of Trust would be signed. Assets held in trust would be included in the Secondary Will resulting in the elimination of probate fees on those assets.
The use of multiple wills and added strategies are complex. Get expert legal and tax advice when embarking on this more sophisticated estate planning to reduce probate fees.
Mary Wahbi, JD, TEP, is a partner at Fogler Rubinoff LLP. She is a long time Wellspring volunteer and a member of the Planned Giving Advisory Committee of Wellspring. Her practice focuses on estate planning, estate administration, corporate reorganizations and business succession planning. Mary can be reached at email@example.com, or (416) 864-7629.