The Benefits of a Secondary Will: FAQs
You might already have a will, but do you know what are the benefits of a secondary will? The use of “multiple wills” in estate planning typically means that there is a primary and a secondary will. The ability to have two or more valid wills was confirmed in an Ontario court case, Granovsky Estate v Ontario. In that case, the judge ruled that there are no legislative prohibitions on restricting a testator to one will. As the law stands in Ontario, you as the testator can have multiple wills to dispose of your estate in the way that you want.
So, what does this mean for the average person? Do you need a secondary will? What are the benefits of a secondary will? What are the considerations you need to make before getting one? This blog will go over some common questions you might have regarding a secondary will.
- What is a secondary will?
- What is the Estate Administration Tax in Ontario?
- How does the Estate Administration Tax impact a secondary will?
- Do I need a secondary will?
- What are the benefits of using a secondary will?
- Do I need a secondary will to save on probate?
- Why does the secondary will need to be carefully drafted?
- Should I review and update my wills?
- Why should I use a lawyer for a secondary will?
What is a secondary will?
First, let’s begin with the basics. A secondary will functions just like your primary will but serves different purposes. You can use a secondary will, also known as “multiple wills,” to manage various classes of assets that you own. For instance, you can differentiate between assets such as a property in Ontario and a real estate asset in another province or country. By utilizing a secondary will, you can also avoid probate fees or Estate Administration Tax because non-probate assets can be included in it. While the primary will must include assets that require probate, the secondary will can contain assets that do not, ultimately saving you both time and money.
What is the Estate Administration Tax in Ontario?
In Ontario, the Estate Administration Tax is about 1.5% of the value of the testator’s total assets at the date of death. You can calculate how much Estate Administration Tax will need to be paid based on your estate value here. This tax will be paid when you probate the assets in the primary will.
How does the Estate Administration Tax impact a secondary will?
In Ontario, individuals only need to pay the Estate Administration Tax on the assets they administer through the primary will. This tax does not apply to assets included in the secondary will unless they are determined to require probate. If any part of the secondary will requires probate, the entire will is subject to probate, and all assets are included in the calculation.
Do I need a secondary will?
The use a secondary will is context dependent. Having a primary will is essential, but having a secondary will all depends on you as an individual and the types of assets you have.
You can typically put the following assets into a secondary will:
- Shares of privately held corporations, related shareholder’s loans and receivables
- Partnership interest and related loans and receivables
- Household goods and personal effects
- Assets that do not have a registered title
- Unsecured debts
A secondary will can also be a useful estate planning tool if you have a cottage or winter/summer home outside of Ontario, where the language and the law may be different to that of Canada.
What are the benefits of using a secondary will?
In Ontario, using a secondary will typically offers the main benefit of minimizing probate fees. Probate fees are calculated based on a percentage of the value of assets in your estate that require probate. You can place the assets requiring probate in the primary will, while the secondary will can list all the assets that do not require probate. Additionally, a secondary will can distribute assets similarly to the primary will. This means that both wills can have the same estate trustee(s), and although each will is administered separately, careful drafting allows for the same beneficiaries to receive assets from both wills.
Do I need a secondary will to save on probate?
You will need a secondary will to contain all the assets that you do not need to pay probate for in order to benefit and save on probate fees. If you only have one will, and in that will you have assets subject to probate and other assets that typically are not subject to probate, you will pay probate fees for the entire value of the estate, including the ones that would normally not be subject to probate.
For example:
Use of 1 will $300,000 cash in a bank account + $500,000 in shares of privately held company = =$800,000 total assets = $11,250 in Estate Administration Tax
Use of secondary will $300,000 cash in a bank account put into a primary will = $3,750 in Estate Administration Tax
The $500,000 in shares of the privately held company would not be probated and would not be subject to any Estate Administration Tax if it were placed in a secondary will. This results in savings of thousands of dollars in the Estate Administration Tax and is typically the reason why people use a secondary will. Your tax savings will depend on your circumstances and the assets you own, but using a secondary will is the only way to save on probate fees for items that do not require probate.
Although using a secondary will has its benefits, you must be cautious. Using a secondary will does not guarantee that probate and probate fees will be avoided. There could be unexpected situations, especially in more complex situations, where a third party might require probate on a particular asset before they can release the asset to you. An experienced lawyer can help you determine what assets you can put into a secondary will to help you avoid probate fees in Ontario.
Why does the secondary will need to be carefully drafted?
You need to be careful when drafting a secondary will. Having multiple wills requires diligence in drafting them so that they do not accidentally revoke each other and that the gifts are not doubled. You’ll also want to ensure that you clearly state your intention that you will use multiple wills in order to achieve your desired estate planning objectives. If you make any mistakes while drafting the will you may end up in a situation where neither of your wills will be valid. For this reason, it is recommended that you obtain the assistance of a lawyer when drafting a secondary will.
Should I review and update my wills?
It’s important to regularly review and update your will(s), especially when it comes to a secondary will due to potential changes in your life circumstances and assets. For instance, if you dispose of private shares in a corporation through your secondary will, but later acquire shares in another corporation that require probate, your secondary will would need probate as well. This would include the value of all assets in the secondary will when calculating probate fees. As a result, your plans may be disrupted and the benefits of having a secondary will could be lost. To ensure your intentions are accurately reflected and you can fully benefit from a secondary will, it’s crucial to review and update it. Keep in mind that there will be a cost associated with reviewing and updating, so it’s important to evaluate if a secondary will is the right estate planning tool for you.
Why should I use a lawyer for a secondary will?
It is recommended to seek the assistance of an experienced estate planning lawyer to draft your secondary will. An estate lawyer can help you determine if a secondary will is the appropriate estate planning tool for your needs. Additionally, they can assist you in drafting and executing the will to meet Ontario’s legal requirements and accurately reflect your intentions. By working with a lawyer, you can ensure the accurate drafting of your wills and make the most of this powerful estate planning tool.
If you require any assistance with your estate planning get in touch with us at Beffa Law and we will be able to help you make the right choice. Beffa Law is a law firm serving Oakville, Burlington, Milton, Mississauga, and other areas west of the GTA. We offer assistance in estate planning along with other practice areas. Call us at 647-812-8462 or email us at info@beffalaw.ca to set up an appointment to discuss your questions or concerns.
