Business Owner Corporate Wills

Business Owner Corporate Wills and Professionals with Multiple Wills can include basket clauses to deal with their assets as they estate plan to reduce probate taxes. A recent decision by the Ontario Superior Court of Justice in Re Milne Estate, 2018 ONSC 4174 was appealed and overturned after raising concerns of a conventional practice of estate planning. Lawyers intervened in the appeal due to the adverse impact upon the use of basket clauses in multiple wills following the original decision of Justice Sean Dunphy.

For the past two decades, business owners and professional corporation owners have used multiple wills that include basket clauses to deal with their corporate assets as a strategy to reduce estate administration tax. Estate administration tax like probate fees is calculated on the value of the estate probated. In the case of estate assets of a value up to $50,000.000, it is calculated as $5.00 for every $1,000. Whereas estate assets valued above $50,000.00, it is calculated as $15.00 for every $1,000.00. Estate assets include all assets owned by the deceased subject to probate. This includes the fair market value of all real estate in Ontario and all personal property of the testator at the time of death. Understandably, secondary or corporate wills deal specifically with business assets or the practice of professionals to avoid being subject to probate fees.

The Ontario Superior Court of Justice originally ruled that Wills cannot leave to the discretion of the estate trustees the distribution of one’s assets. Given that a testator often executes their Last Will and Testament many years in advance of death, the Appeal found that it is often impractical to provide a definitive list of assets which will require or not require a Certificate of Appointment. Therefore, estate planning lawyers often provide estate trustees with the power to determine whether a particular asset requires a Certificate of Appointment through basket clauses. The use of such clauses has been a common estate planning technique to overcome this practical problem.

In response to the certainty of the subject-matter in the Primary Will, Justice Marrocco of the Divisional Court found that the Application judge erred in law. A similar question was raised in the Panda Estate (Re) by Justice Penny who concluded that a will is not a trust and as such the three certainties are not required. Even though a Trust may be found in a Will, it is not a requirement as to the validity of the Wills and neither is required to be admitted into probate. A Trust is intentionally created by statute and not by the Will. The nature of a beneficiary under a Will confirms that a Will is not a Trust.

Justice Marrocco, nonetheless, addressed the issue of the subject-matter certainty. He was satisfied that the subject-matter of the Primary Will is certain because the personal representatives are instructed to ascertain if a Certificate of Appointment is required in order to transfer or realize the asset by consulting the institution concerned. The personal representatives then categorize the asset in one of the Wills according to that objective criterion rather than their discretion.

The purpose of probate is to determine if the Will in question represents the Testator’s Last Will and Testament. In the Panda Estate (Re), Justice Penny viewed that broader questions of interpretation and the validity of powers of appointment or other discretionary decision-making conferred on estate trustees are matters of construction and not necessary to the grant of probate. As a result, Justice Marrocco, was satisfied that the Application judge exceeded his jurisdiction by examining the essential validity of the Will in question at the probate stage.

The validity of the vast majority of Multiple Wills in Ontario is not an issue as confirmed by Justice Greer in Granovsky Estate v. Ontario (1998), 156 D.L.R. (4th) 557, [1998] O.J. No. 508 (S.C.J.). However, if you have Multiple Wills, we recommend that you have them revised by a qualified lawyer as a precaution to determine whether updates or amendments are needed.

Conduct Law is a business based law firm with locations in Florida, including Tampa, Orlando and West Palm Beach and Ontario, including Ottawa, Barrhaven, Kanata and Winchester. Our professionals are experienced business lawyers who can help with corporate, estates, real estate matters including implementing corporate structures depending on your legal corporate requirements.  Feel free to call or write one of our professionals at info@conductlaw.com or 613.440.4888 for all of your business, commercial, real estate and estate planning needs.