A few months ago I wrote an article about the court’s ruling in a case called Milne Estate, involving a situation where the Deceased had made two Wills – a Primary Will, and a Secondary Will. The Judge had ruled their wording was not specific enough in terms of the Estate Trustee’s authority and discretion concerning the allocation of Assets between those two testamentary instruments. The Judge ruled that the Secondary Will was invalid. This decision resulted in two unfortunate outcomes for the beneficiaries: 1) the Deceased’s attempt to minimize the assets to be subject to Probate was ruled void; and 2) the amount of Probate fees to be payable by the Deceased’s Estate would be increased substantially!
By way of background explanation, in Ontario when an individual dies (and assuming he or she has had a Will prepared) the Will is submitted for approval and validation by the Estate Court – a process known as applying for “Probate”. The individual(s) named in the Will are called the Estate Trustee(s), and they are named in the Court issued Certificate of Appointment. Probate fees (taxes) are payable based on the value of the assets of the Estate which require Probate as at the date of death. The current fee Is 1.5% per $1000.00 of the total value of the Estate. The filing of the Probate application does not require all assets of the Deceased to be included in the application.
As established many years ago in a case called Estate of Granovsky, it has become common practice for individuals to divide their assets into two different classes. The first is composed of assets such as insurance policies, bank and investment accounts, shares of publicly traded companies on the Stock Exchange, certain real estate holdings, etc. The various financial institutions will require the production of a Certificate of Appointment appointing an individual as the Estate Trustee authorized to deal with the Estate’s assets – which is evidence of a Will being accepted and approved by the Estates Court.
The second class of the Deceased’s assets, consisting of those that may not require Probate, are set out in a Secondary Will. Typically, these consists of items such as an individual’s motor vehicle, shares of a private company owned by the Deceased, and the Deceased’s personal items. In these situations, it became established practice in Ontario that the Primary and Secondary Wills each contain provisions authorizing the Executors to
use their discretion in deciding which assets will be covered by the Primary Will (and thus subject to Probate) and which would be covered by the Secondary Will (and exempt from Probate). This was the issue which was ruled on by the Judge in the Milne Estate case.
In a case decided shortly after the Milne Estate case, the Judge in a case called Panda Estate decided that the Ontario cases prior to Milne Estate were actually correct as they related to the use of multiple Wills. The Judge ruled that the law giving the individual discretion on the allocation of assets requiring Probate and those not requiring Probate to be included in two separate Wills, was still valid in Ontario.
Thankfully the Ontario Court of Appeal recently overruled the Milne Estate decision. This gives needed clarity to the law of Estate planning, and confirms that the use of Primary and Secondary Wills, properly drafted, continues to be valid and an accepted part of Estate planning in Ontario.