A Tale of Two Wills: Private Shares & Reducing Probate Fees with Multiple Wills

Applying for probate can be cumbersome, expensive, and can delay the administration of an estate. Unfortunately, it may be a practical necessity. The executor often needs to prove that they have legal authority to administer the estate in order to deal with certain types of estate assets. This is especially true in cases where the estate holds substantial assets, such as real property or a portfolio of investments in public corporations.

That being the case, probate is not always required, and may even be avoided in some high-value estates. A good example is where the deceased’s primary assets are shares of a private company. If the deceased didn’t own any other assets that would require probate (e.g. real property without a joint tenancy, shares in a public corporation, etc.), then probate could potentially be avoided completely. Even if the deceased did hold assets that required probate, the probate fees that would otherwise be associated with those private shares could be avoided through proper estate planning.

Use of Multiple Wills to Avoid Including Private Shares in a Probated Estate

The use of multiple wills is a common estate planning strategy to avoid subjecting the deceased’s shares of a private company to probate. Ontario courts have recognized this method as a valid way to reduce probate fees.¹ Typically, one will, known as the “primary will” deals with all assets other than the private shares, which are not subject to probate, while the “secondary will” would deal with administration of the private shares exclusively. Only the primary will would be probated, and so probate tax would not be payable on the private shares distributed under the secondary will. This method was discussed in the Lipson v. Lipson, Kaptyn Estate, Re, and Neuberger Estate v. York decisions.²

Despite the tax-efficient nature of private shares, executors and estate professionals should be wary of excluding private shares from probate where multiple wills are not used, and should appreciate the unforeseen circumstances that may arise with multiple wills, especially where ambiguities or mistakes in their drafting come to light.

In Granovsky Estate v. Ontario, [1998] O.J. No. 508, the Ontario court considered whether a secondary will had to be probated and whether probate fees had to be paid on the assets governed by it.³ The court in Granovsky referred to the case of Sadler Estate, Re (1991) which dealt with an executor’s attempt to secure a limited grant of probate only on some of the deceased’s assets to avoid including the deceased’s shares of a private company as part of probate.⁴ In Sadler, the court refused the request, noting that no authority was cited for the proposition that the saving of probate fees or taxes was a sufficient special circumstance to warrant the limited granting of probate.⁵ Notably, unlike in Sadler, the court in Granovsky was dealing with a primary and secondary will, found that Sadler was distinguishable, and ultimately determined that the secondary will was not subject to probate.⁶

Even borderline questionable drafting of multiple wills may ultimately require the testator to seek directions from the court and possibly apply to rectify the language of the wills. In the recent decision of Gordon v. Gordon, the court heard an application brought by the estate trustee to, among other things, limit the certificate of appointment to the assets referred to in the primary will.⁷ In that case, the primary will purported to deal only with limited assets, yet paragraph 3 of the primary will referred to “all property”.⁸ In this case, the court found that the primary and limited wills were “well-crafted and well-drafted”,⁹ and determined that the primary will did not need to be rectified to carry out the deceased’s intentions.¹⁰

Issues regarding the testator’s capacity may also complicate the effectiveness of using multiple wills to avoid probate. In Kaptyn Estate, Re, the deceased sought to restructure his assets and executed two wills to avoid his private shares from passing through probate. Before the restructuring had been fully completed, a codicil was executed to amend the secondary will. However, by that point, the capacity of the testator was in issue, and so an application to propound the will was objected to.¹¹ Fortunately for the propounder of the will, the court determined that the deceased had the necessary knowledge and understanding and requisite testamentary capacity to understand and approve of the contents of the codicil to his secondary will.¹²

Individuals considering the use of multiple wills to avoid probate fees are cautioned to consult with competent estate professionals before ultimately deciding on whether it is an appropriate strategy for their estate planning needs. Using multiple wills has been a well-tested strategy to minimize the taxes owing on an estate, especially where the estate includes high value shares from private companies. That being the case, careful consideration should be taken to ensure that the language used in the multiple wills clearly delineates which property they are authorized to administer. Further, unforeseen circumstances such as restructuring the holding of private shares and the testator’s subsequent capacity issues may ultimately compromise the effectiveness of the multiple wills.