Multiple Wills – Benefits, Risks and Uncertainties by Jordan Forsyth
Before the Wills, Estates and Succession Act (British Columbia) (“WESA”) came into force in March 2014, any executor applying for a Grant of Probate in BC had to pay probate fees of 1.4% on the value of all assets forming part of the deceased’s estate. However, Section 122 of WESA now states that the applicant for a Grant of Probate is only obligated to disclose assets passing to him or her “in his or her capacity” as the deceased’s personal representative, rather than all assets passing to any and all personal representatives. Accordingly, in theory if a will-maker appoints one executor to administer a Will governing only assets that will require a Grant of Probate, he or she is only obligated to declare and pay probate fees on the value of those specific assets passing to him or her as personal representative, whereas a second executor administering a Will governing assets that do not require a Grant of Probate (such as certain shares of a privately-held company) can simply deal with such assets without needing to apply for a Grant of Probate and therefore avoid the need to pay probate fees of 1.4% on such assets.
However, even for an estate where the value of assets not requiring a grant of Probate (such as company shares) are very high (and so possible thousands of dollars in Probate fees could be saved), there are significant complexities and potential disadvantages to using a multiple Will structure even where thousands of dollars in probate fees could be saved.
The following is a list of just a few of the potential complications that may be encountered in the course of trying to avoid probate fees through the use of multiple Wills:
- Two Executors – The need to draft two separate Wills with two different personal representatives in order for the multiple Will strategy to work under WESA costs fees due to the complexity of drafting two separate Wills that must work together.
- Wills Variation Risk – Whereas the Will that will be submitted to Court for a Grant of Probate will be protected from a Wills Variation application under WESA by an unhappy spouse or child once 180 days from the Grant of Probate has passed without any variation application being made, the Will governing the assets not subject to probate will never be protected from a challenge no matter how much time passes, since the 180 day limitation period will never start to run without a Grant of Probate.
- Uncertainty – There is also an element of uncertainty regarding how British Columbia courts will interpret the provisions of WESA which allow for multiple Will planning in BC. While the wording of WESA seems to clearly allow for such planning, until the BC Supreme Court actually considers and approves an estate structured to avoid probate fees by using multiple Wills and executors, an element of uncertainty will remain.
- Graduated Rate Estate Rules – On January 1, 2016, the Income Tax Act (Canada) was amended to provide that a deceased’s estate is able to access graduated tax rates only in accordance with a series of new “Graduated Rate Estate” restrictions. However, questions have arisen regarding whether having two separate Wills with two separate personal representatives will force the two personal representatives to choose only the assets governed by one Will to be eligible for the tax benefits of being a Graduated Rate Estate. Even if Canada Revenue Agency were to take the official position that only one estate arises out of a person’s death even if there is more than one Will, it would still be necessary for the personal representatives to work together very closely to ensure that the 36 months of graduated tax rates are not lost and that all necessary joint elections are made.
While multiple Wills planning under WESA may lead to significant probate fee savings, especially for estates that have valuable privately-held company shares, the potential pitfalls and complexities outlined above will need to be carefully considered in consultation with accountants and estate planning lawyers before proceeding.
By Jordan Forsyth