Over the last few years, there has been an increased interest in the use of “multiple wills” as a financial planning tool. Are they a good idea? Yes. Are they for everyone? No. Are they worth investigating? Yes.
Anyone operating his or her own business or who has significant assets in a private company is advised to do some simple math to determine the amount of money that may be saved through the use of multiple wills.
The traditional process of administering a deceased’s estate was to apply to the court for “probate”(now called “Certificate of Appointment of a Trustee with a Will”) and to pay “probate fees” (now called “estate administration taxes”) on the total value of a deceased’s estate. Probate fees tripled in 1992 to approximately 1.5%, or $15,000, on each million dollars’ worth of assets in the estate. Since then, avoiding probate fees has become a high priority for those involved in estate planning. One of the solutions found to avoid, or reduce, probate fees is the concept of a creating multiple wills.
A favourable decision of an Ontario court in 1998 has resulted in the use of multiple wills being a valid probate planning strategy. In that case, the deceased had prepared two wills, one covering shares in certain private corporations, valued at approximately $25,000,000, and a second will covering the balance of his assets, valued at approximately $3,000,000. Probate was required in respect only of the second will, resulting in a saving of probate fees of approximately $375,000.
Most banks and other financial institutions will require the probating of an estate containing assets considered to have a “public” aspect, such as real estate, shares in a public company and bonds. However, shares in a privately-held corporation can be transferred to the beneficiaries without the necessity of probate if the other shareholders in that corporation agree. It makes sense then for an individual holding shares in a private company to isolate those shares from the balance of his or her assets so that, upon death, those shares can be transferred to the named beneficiaries free of the probate process and free of the payment of probate fees.
As with any other proper financial planning tool, the cost savings which can be achieved through the use of multiple wills will likely make up for the additional cost of one or more additional wills. It would certainly be worth the effort of consulting with professional advisors specializing in estate planning to determine if multiple wills may be beneficial to your particular situation.