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SUCCESSion: Tax & Estate Matters

Jan 29, 2019

Update on Multiple Will Planning: Milne Decision Successfully Appealed

Following months of uncertainty, we are pleased to report that a recent court decision has overturned a prior decision that invalidated a common estate planning strategy used to reduce probate fees.

Estate administration taxes (commonly known as "probate fees") are levied when a Will is submitted to court for validation. Probate fees are applicable at a rate of approximately 1.5% of the value of assets governed by that Will.  For many years, multiple Wills have been used as an estate planning technique to reduce probate fees by allocating the testator's assets between two pools. All of the testator's assets for which the executors require probate (e.g. bank accounts and real estate in the testator's name) are dealt with under a "public" or "Primary" Will, and those assets for which the executors do not require probate (e.g. private company shares and household items) are dealt with in a "private" or "Secondary" Will.

Multiple Will planning has evolved over the years, such that many Primary and Secondary Wills now provide the executor with broad discretionary powers to determine whether particular assets should be allocated to the Primary Will or the Secondary Will (a so-called "basket clause"). A basket clause will generally direct the executors to decide which Will an asset should be allocated to, on the basis of whether or not the asset requires a grant of probate.

As we previously reported the validity of this type of discretionary power was tested in the recent Ontario Superior Court decision of Re Milne Estate. In Milne the court concluded that a Will containing a basket clause was invalid. The basis for this conclusion was that the use of a basket clause made the terms of the Will uncertain, thus invalidating the entire Will. If correct, this decision would mean that many thousands of existing Wills in Ontario would potentially be invalidated.

Milne was appealed to the Divisional Court, and on January 24, 2019, the court released its decision allowing the appeal and reversing the decision of the lower court. Following several months of uncertainty, the appellate court's decision provides validation regarding the use of basket clauses in Wills, despite the discretionary powers they grant to executors.

The Milne decisions serve as a good reminder that changes in the law may have a significant impact on your estate plan and that you should review your plan regularly. Should you have any questions or should you require any assistance with your estate planning, we invite you to contact one of our estate planning lawyers.


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