STEVE NYVIK, SENIOR PORTFOLIO MANAGER AT LYCOS ASSET MANAGEMENT
Probate does not apply on an asset-by-asset basis. It applies on your entire Will and all assets covered in that Will. So if just one asset requires probate, then your entire Will and all assets that devolve under that Will are required to be probated.
Estate Requiring Probate
For example, assume that your estate includes shares of a family holding corporation worth $1 million and a car worth $35,000. Since your car requires probate to transfer ownership, it will be necessary to probate your entire estate – both the shares of your company and your car. As such, your Executor will have to pay probate fees based on the entire gross estate value of $1,035,000. If you are a resident of British Columbia, your estate would be subject to probate fees of $13,940 (= 0.6% x $25,000 + 1.40% x $985,000).
Multiple Wills as a Probate Minimization Strategy
Given that probate fee and legal fees can add up, one probate minimization strategy is that of having multiple Wills:
- One Will holding the assets that require probate for the province where you reside such as bank accounts, investment portfolios, real estate and tangible assets.
- Another Will holding assets that do not require probate (example: for shares and shareholder loans of your private company and for your personal effects).
- If you are resident in a province or jurisdiction outside of British Columbia, a third Will for your real estate and tangible assets situated in B.C.[i]or in jurisdictions outside of where you reside to avoid paying probate twice on the same assets (note that the Probate Fee Act, British Columbia courts don’t charge the probate fee on non-B.C. real and tangible assets).
The result is lower probate costs because only the assets of the primary Will are subject to the provincial probate tax.
Going back to our example above, if you instead you had two Wills, one that dealt with your company shares and the other Will for your car, your Executor for the Will with the car might only need to have probated the that one Will containing just your car. This would have reduced your gross estate to $35,000. And probate fees would reduce to $60 (= 0.60% x ($35,000 – $25,000)).
The multiple Will strategy has a very limited purpose: reducing the overall value of assets that have to pass through probate in an uncontested Wills situation.
Multiple Wills and the Law
The multiple-Will technique has been used successfully in Ontario to reduce exposure to probate taxes in that province. In Ontario, the judge of the court case of Granovsky v. The Queen ruled that if a person dies with multiple Wills (with a common Executor), the Executor seeking probate is not obligated to probate all of the Wills. The Executor has the option to probate whichever of the Wills of the deceased and probate taxes would apply only on the assets that were part of the probated Will.
British Columbia legislation is somewhat different to Ontario as British Columbia probate fees are applicable on the gross value of all property that passes to the personal representative of the deceased. The personal representative is the Executor of the Will(s) in question. If the Executor of a Will is applying for probate, the Executor has a duty to list all the assets of the deceased passing to the Executor. However, there is no obligation on an Executor to disclose any assets that are passing to some other Executor under another Will.
So going back to our example, you would need two different Executors: one Executor who administers your Will with the private company shares, and a different person who is the Executor of the Will which deals with your car[ii].
Multiple Will Limitations
If one is adopting this multiple Will technique, it will be important to ensure that the Wills are carefully drafted so that one Will does not revoke the other. As well, it will be necessary to carefully craft the Will language so that each will deals with the correct assets.
The use of multiple Wills can limit the value of assets that need probate, but only if none of the Wills are challenged. For example, it would still be possible for a surviving spouse or child who is dissatisfied with the provisions made in one or both of the Wills to attempt to vary the Wills. If there is a concern about possible challenges to a Will, it is much better to proceed under some other strategy – such as having your assets settle in a Trust so that they will pass outside of your estate and not be subject to a Wills Variation Act claim.
To help develop your estate plan please contact us. We will work together with your estate planning lawyer to help custom design and implement your estate plan. Estate Planning is provided at no extra cost clients of Lycos Asset Management Inc.
[i] Consider an Alberta resident who dies leaving British Columbia real estate valued at $1 million, with the balance of his estate consisting of an investment portfolio and money in a bank account in Alberta valued at $5 million. If he has executed only an Alberta Will, that will must also be probated in BC (otherwise knowing as resealing the Will) in order to transfer the British Columbia real estate. If instead the Alberta resident executes two Wills – a British Columbia will dealing only with the British Columbia real estate and an Alberta will dealing with all other assets, British Columbia probate fees will be equal to 1.4% of only the $1 million value of the British Columbia real estate ($14,000), resulting in a $70,000 probate savings (= 1.4% of the entire $6 million estate = $84,000 – $14,000 for only BC assets = $70,000 savings).
[ii] Note that we even do better if you transfer the car to the company or to your spouse or child while you’re still alive. As such, we might only need one Will and might be able to completely avoid the need for probate. Similarly, you might own your stocks and bonds through your company or B.C. real estate and tangible assets. Where assets are in your name, we should first consider the costs for transferring assets – like the property transfer tax for B.C. real estate and GST/HST. Similarly, for your automobile, there is GST/HST on the value of your car.