Estate planning can be complex and overwhelming, especially for those unfamiliar with the legal intricacies. One strategy that has gained popularity is the use of multiple wills involving primary and secondary wills. This approach is particularly beneficial for individuals with diverse asset portfolios that include private corporations and business assets. The strategy helps to minimize estate administration tax and simplify asset distribution. But do you need multiple wills? The answer depends on various factors, including the types of assets you own and your estate planning goals.
1. Understanding Multiple Wills
The concept of multiple wills was affirmed in the 1998 Ontario case of Granovsky Estate v. Ontario, which recognized that a testator could create separate wills to manage different types of assets. This strategy ensures that only certain assets go through probate, while others bypass the probate process, reducing estate administration tax.
2. Primary vs. Secondary Wills
a.) What is a Primary Will?
A primary will covers assets that require probate before they can be transferred to beneficiaries. These assets typically include:
- Real estate (e.g., primary residence, rental properties)
- Bank accounts (unless jointly owned or designated with a beneficiary)
- Investment portfolios (excluding certain registered accounts with named beneficiaries),
- Retirement accounts that do not have designated beneficiaries
b.) What is a Secondary Will?
A secondary will governs assets that can be transferred to beneficiaries without probate. This typically includes:
- Shares in private corporations
- Personal items (jewelry, art collections, heirlooms)
- Business assets and interests
- Loans receivable or debts owed to the testator
3. Benefits of Multiple Wills
The main advantages of having multiple wills are the ability to reduce estate administration tax (EAT) and privacy. In Ontario, EAT is calculated based on the value of assets that go through probate. By segregating assets into primary and secondary wills, individuals can ensure that only the assets for which the probate is necessary are subject to EAT, potentially saving thousands of dollars.
Once a will is subjected to the probate process, the content of the will becomes a matter of the public record. This also includes the values of the assets which pass on to the beneficiaries under the will. The assets, their values and their beneficiaries that pass under the secondary will remain private because they are not subjected to the probate process with the court. Some assets, such as the shares of the private corporations, jewellery and arts can be very costly and difficult to value. The valuation process can be avoided if the assets can pass to the designated beneficiaries without probate.
4. When Should You Consider Multiple Wills?
Not everyone needs multiple wills, but they can be highly beneficial in the following situations:
- Business Owners: If you own shares in a private company, especially if most of your assets are sitting it such private company.
- High-Value Personal Assets: If you have significant assets such as artwork, jewelry, or collectibles that do not require probate.
- Individuals with Complex Estates: If you have a combination of probate and non-probate assets that require strategic planning.
5. Legal Considerations and Professional Guidance
While multiple wills offer significant benefits, they must be properly drafted to ensure they align with legal requirements. Poorly structured wills can lead to conflicts, legal challenges, or unintended tax consequences, or they can even revoke each other. Consulting with an experienced estate planning lawyer is crucial to ensuring that your wills are valid, enforceable, and aligned with your financial goals.
