After several months of uncertainty potentially affecting thousands of wills in the province, the Divisional Court has confirmed that not only is the use of double wills acceptable, but there is no uncertainty that invalidates a will when “allocation clauses” are used in the definitions of the assets passing under each of two wills.
The expense incurred following the Milne Estate decision, which I blogged about in October [Blog Post] has been estimated at millions of dollars. Since late September of last year, Ontario lawyers have been working hard to identify clients whose multiple wills may be affected, but thanks to the favourable appeal decision, these efforts can be put to rest.
Justice Dunphy, in the lower court decision, found that a will is a trust and to be valid it must satisfy the three certainties: objects (beneficiaries), subject-matter (assets), and intent (to create a trust). He stated that because the Milne Estate assets flowing through the primary will were unclear to the estate trustees at the date of death, the requirement for certainty of subject-matter failed and the primary will was invalid.
Justice Dunphy also found that the allocation clause permitting the estate trustees to exclude certain assets from the primary will gave them too much discretion.
Justices Marrocco, Swinton,and Sachs heard the appeal. The Court confirmed that a will is not a trust and iterated that trusts may be created in a will, but a will does not necessarily create a trust; thus subject-matter certainty is not required to make a will valid.
It is not realistic or possible to state with certainty at the time the will is written which assets will be owned at death and require a Certificate of Appointment and which ones will not. Drafting lawyers include allocation clauses because these clauses permit estate trustees some discretion to determine after death which assets require a Certificate of Appointment and will flow through the primary will and which assets do not require a Certificate of Appointment and can pass through the secondary will.
Overturning Justice Dunphy’s finding, the Court held that “[t]he property in the Primary Wills can be clearly identified because there is an objective basis to ascertain it; namely whether a grant of authority by a court of competent jurisdiction is required for a transfer or realization of the property. As a result, the Estate trustees can allocate all the deceased person’s property between the Primary and Secondary wills on an objective basis.”
The Court confirmed that this does not give absolute discretion to the estate trustees. Estate trustees are beholden to various institutions to decide whether the institution requires probate for certain assets, so the discretion given to the estate trustees in allocation clauses is not arbitrary.
In summary, secondary wills remain an effective tool to mitigate probate tax payable, avoid delay and preserve privacy. The Dunphy decision unnecessarily created uncertainty and led to undue expense, as lawyers sought to respond responsibly on behalf of their clients, all to return to where we began.