WILLING TO SAVE: The use of Multiple Wills in Estate Planning

Author: Fordham & Brightling Associates | | Categories: Business Law , Commercial Mortgage , Contract Drafting , Corporate Law , Estate Planning , Law Firm , Legal Service , Real Estate Lawyer , Residential Mortgage

While it was not that long ago that I attended law school, (yes I really did) I do recall that a will, in order to be valid, must be the “last will and testament” of the testator. The most obvious reason for this requirement is that, almost always, when a person draws a will, he /she revokes any previous will, so that the new will stands alone and is not confused with any previously expressed intentions.

However, for many years, the use of multiple wills has been common when people own property in more than one jurisdiction. Examples include the condo in Florida, the villa in Nice or the yacht in the Caymans (sigh!). Or maybe just the trailer in Tennessee, or the drive-in in Pennsylvania. It is important that such secondary wills cover only the property in the other jurisdiction, and adhere to the laws of the jurisdiction in which the property which they govern exists.

The Ontario government encouraged the use of multiple wills for purposes other than multi-jurisdictional issues back in 1992. How, you might ask? By tripling the fees paid when wills were submitted to the courts for probate. Formerly these were called “probate fees” and were assessed at .5% of an estate’s total value. Now they became “estate administration tax”, anachronistically (and very appropriately) labeled “EAT”, at a rate of 1.5% on an estate value over $50,000.00. Clearly, in larger estates, the amount so devoured, could be significant.

So, just so you realize that lawyers are not just a bunch of pretty faces, some of my colleagues noticed a strange inconsistency in the Estates Act. While section 32(1) required the disclosure of the “total value “ of an estate, for the purposes of probate fees, section 32(3) recognized the possibility of a grant of probate “limited to part only of the property of the deceased”. Aha! they said. What if a will was drawn which dealt with only the property which required probate (now called appointment of estate trustee with a will- don’t ask me why) in order to be transferred to the beneficiaries, and another will dealt with all the other property?

A gentleman by the name of Philip Granovsky settled the matter when he drew two wills, one, the “primary will” which dealt with estate assets amounting to approximately 3 million dollars, and a “secondary will” which dealt with assets totaling over 25 million dollars. Upon Mr. Granovsky’s death only the primary will was submitted for probate. For obvious reasons, the Ontario government objected, but allowed the will to be probated provided that the executors of the estate submit the issue to the court for determination.

In a seminal decision, in 1998, Madame Justice Greer of the Ontario Court, General Division, ruled that only the primary will need be submitted, and that testators are entitled to organize their affairs so as to minimize taxes, including EAT, otherwise payable on their death. The use of multiple wills saved the Granovsky estate approximately $375,000.00. The Ontario government initially indicated it would appeal the decision, but later abandoned the appeal. So, until the government changes the legislation, the decision stands.

The Granovsky decision has been approved of in later court challenges of the use of multiple wills; but a word of caution: such wills need to be very carefully prepared, as well as the subsequent application for probate. Particular care must be taken to ensure that one will does not revoke the other. As well, the assets dealt with in each will must be clearly identified. Certain assets, such as shares in privately held corporations, need not be the subject of probate, while many others do.

The use of multiple wills can be a useful tool in estate planning, particularly in very large estates. As well, the use of trusts, and gifting can minimize the various tax consequences arising on death, including EAT, and Federal and Provincial income taxes. As they say, you can’t take it with you, but you can pass more of it along to your beneficiaries.