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In my first blog, I discussed how you could generally use multiple Wills to avoid paying Estate Administration Taxes. In this blog, I’ll discuss how this came to be in Ontario and what Courts have recently said about using multiple Wills.
Granovsky Estate v. Ontario
We begin with the case of Granovsky Estate v. Ontario, [1998] O.J. No. 508. Here, the Ontario Divisional Court had to deal with the situation where a deceased had two Wills – one of which was probated (and estate administration taxes paid) and another one which was not probated (and no estate administration taxes were paid). The Crown (i.e. lawyers representing the government) wanted the assets in both Wills to be probated and estate administration taxes to be paid. The Estate Trustee resisted. At the end of the day, the Court agreed with the Estate Trustee. No Estate Administration Taxes were owing as the secondary Will did not have to be probated.
Here’s how the Court got there. The FIRST WILL distributed the bulk of the estate except for corporate share, any amounts receivable by him from those companies, and any assets held in trust for him by any of those companies; the SECOND WILL dealt with those corporate shares, amounts receivable and assets held in trust.
Now the big issue which the Court had to decide was whether the assets in the SECOND WILL needed to be probated and Estate Administration Taxes paid. The Court looked at the forms developed by the legislature for probate, other legislation, and observed that certain ASSETS did not have to be probated. These assets included: insurance policy payouts to designated beneficiaries, RRSP holdings for which the deceased has named beneficiaries under the appropriate beneficiary designation forms completed during her or his lifetime, jointly-owned assets (which devolve to the surviving co-owner upon death), real property situate outside of Ontario, and cash or bearer certificates.
Next, the Court had to determine whether it was legal for a Testator / Testatrix to make multiple Wills for different types of property. Having reviewed a lot of caselaw, the Court concluded that it was OK: “A testator may make any number of wills to deal with different types of property”.
Finally, and perhaps most importantly, was the issue of whether everyday folk are entitled to organize their affairs in order to reduce their Estate Administration Tax. Here, the Court unequivocally said: “Yes, you are!” Here are 2 key passages from this case worth repeating:
22 Therefore, the Act is not a taxing statute, but an administrative one. Even if, on appeal, probate fees were found to be a tax, Testators have unfettered discretion when dealing with their own assets in their Wills, subject to certain legal claims dependants may have against estates if they are not adequately provided for, and subject to the rights of the surviving spouse to take under the Will or elect against it. Testators therefore have the right to organize their affairs in a way which will allow their estates to pay as few probate fees or as few taxes as legally possible. They may give their assets away immediately before death, they may settle inter vivos trusts whereby the capital does not revert to their estates on their deaths, they may transfer realty into the joint names of themselves and others with right of survivorship, they may register securities and/or bank accounts in joint names with right of survivorship, and they may name designated beneficiaries under plans of insurance and pension schemes and ISPs. None of these assets are included by estate trustees when they value assets for probate purposes, as they do not fall under the aegis of the estate trustees to distribute at death. All are aspects of estate planning in the testator’s lifetime which take effect at death.
23 The estate planning of having multiple Wills in the form of a Primary Will and a Secondary Will which take effect on death is, in my view, simply another example of how a careful testator plans to have her or his estate pay the least possible probate fees on death. There is no legal obligation to obtain probate and, as I have noted above, limited grants are permissible. If the directors of the private companies in which the deceased owns shares or has an interest at death do not require the formal grant from the Court to deal with the transmission of the assets and are prepared to deal with the estate trustees named in the Secondary Will, why then should the estate have to pay probate fees on those assets?
Overall, the deceased’s estate was not required to probate the SECOND WILL or pay Estate Administration Taxes in respect of the assets thereunder. SWEET!
So, if that happened all the way back in 1998, what is the current state of the law? Has it changed? Nope. In Kaptyn Estate v. Kaptyn Estate, [2010] O.J. No. 3347, the Ontario Superior Court of Justice reiterated the findings in Granovsky Estate v. Ontario:
55 A testator may use multiple wills to govern the disposition and administration of different pools of assets he owns at the time of death. Multiple wills have enjoyed a long history where a testator owned assets located in different jurisdictions. During the 1990s in Ontario multiple wills emerged as a device by which to divide assets into different pools as a means to reduce the probate fees that would otherwise be payable. As Greer J. observed in Granovsky Estate v. Ontario: “Testators therefore have the right to organize their affairs in a way which will allow their estates to pay as few probate fees or as few taxes as legally possible.” … Greer J. concluded that where the executors under one multiple will had no need for probate to deal with the assets identified in that will, no requirement existed for them to pay probate fees on the assets governed by it.
56 Multiple wills are very flexible documents which a testator can use to establish a variety of regimes to govern the disposition of his property on his death. A testator can draft multiple wills to create distinct pools of assets administered by different sets of executors.
Overall, the Ontario courts have confirmed that avoiding probate is now a standard part of estate planning in Ontario. Wills are no longer submitted for probate as a matter of course.
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