The use of multiple Wills as an estate planning technique has been around for many years in Ontario, primarily as a means to reduce Estate Administration Tax (commonly known as ‘probate tax’). Until recently, however, multiple Wills were typically only recommended for clients with valuable ‘private’ assets (assets that do not require probate to be transferred, such as shares in private corporations, artwork, jewelry, cars and boats), where there were significant probate tax savings to be had.
As a result of the new reporting requirements for estate trustees in Ontario, however, multiple Wills may be an important estate planning consideration for anyone who has a house full of personal possessions.
As of January 1, 2015, estate trustees are required to submit an “Estate Information Return” to the Ministry of Finance within 90 days after being granted a Certificate of Appointment of Estate Trustee (subject to limited exceptions).
The Estate Information Return requires the estate trustee to itemize the assets on which probate tax was paid when the Certificate was applied for. Estate trustees must be able to provide proof of the values of those assets. The Ministry has the power to audit Returns and to impose penalties up to and including jail time.
Valuing bank accounts and investment accounts is straightforward. In most cases, the values can be obtained straight from bank statements. Valuing real estate is also straightforward, as a letter of opinion from a realtor will usually suffice.
Valuing household contents, jewellery, cars, boats, artwork and other personal property is much more challenging, however. Previously, estate trustees would simply make a good-faith estimate of the value of these items and pay probate tax on that estimate. Now, estate trustees may have to obtain independent valuations and make inventories of these personal assets, which can be a time-consuming and costly process.
All of this can be avoided by dealing with your personal possessions in a secondary Will. The terms of the secondary Will will usually match those of the ‘primary’ (probated) Will, with the same estate trustees and same beneficiaries. The big difference is that, as the law currently stands, no Estate Information Return will have to be filed in respect of assets governed by the secondary Will. Therefore, even if the probate tax savings from putting your personal possessions in a secondary Will are minimal, preparing a secondary Will while you are living can save your estate trustees a lot of administrative hassles and costs down the road, not to mention reducing the chance of an audit and penalties.
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