Can you save money by making more than one Will? The answer is yes, but there is a little more to it. First, this technique is best when the value of shares held in your dentistry professional company (DPC) is somewhat significant. For example, if the value of those shares of your DPC is $1 million, then having multiple Wills can save you $14,250. Not too shabby, right?
To fully understand how a multiple Wills plan will save you money, it is important to understand a bit about what happens when a dentist dies in Ontario and about Ontario’s Estate Administration Tax.
Dying in Ontario: Getting the Will Probated
When someone dies in Ontario, the banks, land registry offices, or insurance companies won’t deal with just anyone claiming to be responsible for administering their estate. They want to see that the Estate Trustee has a valid certificate from the Court a Certificate of Appointment of Estate Trustee. They won’t simply accept that any Will put in their face is the actual Will or hasn’t been disputed. These institutions don’t want to be held liable if something goes wrong and they accidentally transfer property or money to the wrong party without the requisite authority. That’s why they demand to see that the Will has been probated. Evidence of this is a “Certificate of Appointment of Estate Trustee” issued by a Court.
That certificate will either be a “Certificate of Appointment of Estate Trustee With a Willif the deceased had a Will” or a “Certificate of Appointment of Estate Trustee Without a Willif the deceased died intestate or without a Will” For more on the different processes involved when there is no Will at all, check out our previous article. As part of getting this certificate, the estate will need to pay Estate Administration Taxes (formerly called Probate Taxes).
Paying Estate Administration Tax
Estate Administration Tax is due when someone files the application with or without a Will for a Certificate of Appointment of Estate Trustee. So says rule 74.13 of the Rules of Civil Procedure and 2. 2(1) of the Estate Administration Tax Act, 1998.
The amount of Estate Administration Tax payable is based on the value of the deceased’s estate at the time of their death. As of January 1, 2020, the calculation is $15 for every $1,000 (or part thereof) by which the estate’s value exceeds $50,000. No tax is payable if the value of the estate is $50,000 or less.
So, here’s an example: if the assets of the deceased’s estate at the time of death is $75,000:
- The first $50,000 is not taxed, so the remainder is 75,000-50,000 = 25,000
- Then the Estate Administration Tax will be 15/1,000 x 25,000 = $375
– If the assets were valued at $75,001, the Estate Administration Tax would be $15 more, or $ 390, because that $1 is part of the next $1000.
So, by doing the same calculations, we can see that for an estate with a value of $1 million:
- 15/1,000 x 950,000 =$14, 250
Note: no tax is payable when the application is for a Certificate of Appointment of SUCCEEDING Estate Trustee with or without a Will or a Certificate of Appointment of Estate Trustee during litigation. In these cases, the legislation prescribes a specific fee that is payable.
Minimizing Estate Administration Taxes
Believe it or not, there are a few legitimate ways to get around having your estate pay Estate Administration Taxes. You can dispose of your assets during your lifetime (either by selling or gifting them), reducing your estate’s asset value. But this may still trigger tax consequences (depending on the type of asset you’re transferring, its fair market value on the date of the transfer, its original cost, and the person receiving it). So, what’s the better solution? Multiple Wills!
How can having multiple Wills reduce your Estate Administration Tax? The idea is that you can probate one Will dealing with certain assets but avoid having to probate another Will dealing with other kinds of assets. The theory goes as follows:
- One Will deals with the assets for which Estate Administration Taxes will be required. These assets include things like bank accounts, lands registered in the Land Titles System, shares or debt instruments of public companies, term deposits, GICs, brokerage accounts, etc. Banks and the Land Registry Office need to see that the Will has been probated and a Certificate of Appointment of Estate Trustee issued before allowing anyone to do anything. So, your estate will have to pay Estate Administration Taxes to probate these assets.
- A separate Will deals with the assets for which Estate Administration Taxes don’t apply. These include assets like real estate registered under the Registry System and not situated in Ontario, personal items, and shares and debt instruments of private corporations. And it includes your privately held shares of your dentistry professional corporation. This means you have separated the value of those shares from your other assets, and NO probate will be required to verify this particular Will! So, by not having to put that $1 million worth of shares through probate, you have saved the $14,250 tax!
So, as you can see, probate fees are relatively easy to avoid if you have a separate will for business assets and personal assets. And while the cost of drafting Multiple Wills depends on your specific circumstances (e.g. dealing with estate trustees, properties, beneficiaries, particular gifts, cash payments, etc.), even paying $2,000 in order to save over $14,000 seems like a great deal!
While the decision to create multiple wills might not be suitable for everyone, you probably have more at stake as a dental business owner than most. Therefore, it’s essential that you understand this potential estate planning strategy and what it could mean for your future. It could mean unnecessary expenses in the tens of thousands of dollars if you don’t.
And don’t forget, when creating estate plans, each individual situation is unique. This is why you need to speak with a professional about all your options. At DMC, we have a dedicated Wills and Estate lawyer experienced in helping business owners make the best choices when estate planning. We can take you through all the possibilities that make the most sense for your situation, including how a Power of Attorney for Personal Care and Power of Attorney for Property could also benefit you. So send DMC an email or call our team directly at 416-443-9280 extension 208.