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Multiple Wills (Part 1): Save $$$ on Estate Adminstration Taxes…

Toronto business lawyerPlease note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to Wills and Estates matters, you should seek professional assistance (e.g. make a post on Dynamic Legal Forms). We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to help you.

Dying in Ontario: Getting the Will Probated
So when a person dies in Ontario, the banks holding their accounts or land registry offices or insurance companies won’t deal with just anyone claiming to be responsible for administering their estate. They want to see that the Estate Trustee (i.e. the person actually appointed under a Will and confirmed by a Court to administer the deceased’s estate) is holding a certificate from the Court. They won’t simply accept that a Will being put in their face is the actual Will or has not been contested in court. They don’t want to be held liable if something went wrong and they accidentally transferred property or money to the wrong party without the requisite authority. That’s why they demand to see that the Will has been probated (i.e. verified by a Court). Evidence of this is a “Certificate of Estate Trustee” issued by a Court.

That certificate will either be called a “Certificate of Appointment of Estate Trustee With a Will” (if the deceased had a Will) or a “Certificate of Appointment of Estate Trustee Without a Will” (if the deceased died intestate or without a Will). Now, as part of the process of getting a Certificate, the estate will need to pay Estate Administration Taxes (formerly called Probate Taxes). Here’s how it works…

Estate Administration Tax
Estate Administration Tax must be paid at the time the application for a certificate of appointment of estate trustee (with or without a Will) is filed. So says rule 74.13 of the Rules of Civil Procedure and 2. 2(1) of the Estate Administration Tax Act, 1998.

The amount of estate administration tax payable is based on the value of the assets of the deceased’s estate at the time of his or her death. It’s calculated as follows: $5 per $1,000 or part thereof, for the first $50,000, then $15 per $1,000 or part thereof by which the value exceeds $50,000 (s. 3, 2(6) of the Estate Administration Tax Act, 1998). No tax is payable if the value of the estate is $1,000 or less.

So here’s an example: if the assets of the deceased’s estate at the time of death is $25,000, then the estate administration tax will be $5/$1,000 x 25,000 = $125. If the assets were valued at $25,001, then the estate administration tax will be $5 more, or $130 because that $1 is part of the next $1000.

Worth mentioning is that no tax is payable where the application is for a certificate of appointment of SUCCEEDING estate trustee with or without a will or a certificate of appointment of estate trustee during litigation. In these cases, the legislation prescribes a certain fee which is payable.

Can you get around paying Estate Administration Taxes?
Believe it or not, there are a few legitimate ways in which you can get around having your estate pay Estate Administration Taxes. Clearly, you can dispose of your assets during your lifetime (either by selling or gifting them) and thereby reduce the asset value of your estate. But this may still trigger tax consequences (depending on the type of asset you’re transferring, its fair market value on the date of the transfer, it’s original cost, and the person who is receiving it). So what’s the solution? Multiple Wills!

Multiple Wills
So how can having multiple Wills reduce your Estate Administration Tax? Basically, the idea is that you can probate one Will dealing with certain assets but avoid having to probate another Will dealing with other kinds of assets. The idea goes as follows: one Will deals with the assets for which Estate Administration Taxes will be required. This includes things like (but is not limited to) bank accounts, lands registered in the Land Titles System, shares or debt instruments of public companies, term deposits, GICs, and brokerage accounts, etc. Banks and the Land Registry Office simply need to see that the Will has been probated and a Certificate of Estate Trustee issued before they allow anyone to do anything. So Estate Administration Taxes will be paid as part of probating these assets.

But the other Will will deal with the assets for which Estate Administration taxes will not be required. This includes things like (but is not limited to) assets for which a beneficiary is named or designated (e.g. life insurance, pension plans, RRSPs, RRIFs); assets held jointly which, upon your death, devolve to the surviving co-owner; real estate registered under the Registry System and not situate in Ontario; personal items; and shares and debt instruments of private corporations.

Now, in the next blog, I’ll discuss how the legality of using multiple Wills to avoid Estate Administration Taxes has been upheld by an Ontario court.

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