Since 1998, when the court in Ontario affirmed the practice in Granovsky v. Ontario, estate lawyers have been using multiple wills to help reduce Estate Administration Tax (commonly called probate tax).
The concept is simple: one will for the assets that require a Certificate of Appointment of Estate Trustee with a Will (a “Certificate”, commonly called probate), and another will for the assets that do not. Since the second will does not need probate, the assets it covers are not subject to probate tax at roughly 1.5%.
The law does not require an executor to get a Certificate. The Certificate is required by third parties, such as financial institutions and the Land Registrar, who need court-certified proof of the Executor’s authority. But some property is not controlled by a third party – for example shares of a privately held corporation, personal effects, and some land purchased under the old Registry system. For those assets, the executor may not need a Certificate and a second will can be used to minimize probate tax.
This September, the Ontario Superior Court of Justice released the Milne Estate decision, in which Justice Dunphy decided that the Primary (probate) Will before him required him the review the Secondary (non-probate) Will as well. The judge found fault with the Primary Will, which contains a clause he considered too broad to identify the specific property passing through the Primary Will. He noted that counsel for the Estate Trustees could not identify any specific property that would pass through the Primary Will.
Justice Dunphy also found fault with the level of discretion granted to the Estate Trustees by the will-maker. He relied on trust principles, stating that a will is a form of trust and a trust requires certainty of subject matter for validity. Since there was no certainty as to the property covered by the will before him, he declared it invalid.
The judgment has been subject to some serious criticism. Learned commentators have argued that it is wrong in law, since a will is not a trust and certainty of the property passing under a will has never been a requirement for validity of a will. Milne has also created great uncertainty whether thousands of similarly worded wills may also be declared invalid when they are submitted to the court for a Certificate.
As a lower court decision, Milne is not conclusive authority until it is upheld upon appeal. It is understood that the case is being appealed. Meanwhile, however, Ontario lawyers must adapt the language in multiple wills to specify which property falls under each will, and reduce any broad discretion an executor may have to determine which assets falling into the primary or secondary will.
Moving forward, the multiple will strategy remains viable. This decision is out of step with the line of cases following the Granovsky Estate, and we continue to recommend multiple wills as a practical strategy to minimize probate tax in appropriate situations, so long as the property to fall into the primary and secondary wills is clearly identifiable.
