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Estates & Wills & Trusts

Rejection of probate applications confounds lawyers

A long-established practice to use primary and secondary wills is running up against some turbulence in the courts, Toronto wills and estates lawyer Mary Wahbi tells

“We’ve had instances now of probate applications of primary wills being rejected or questioned by the court in Toronto,” says Wahbi, a partner with Fogler Rubinoff LLP

She says it's disturbing that some applications that are following a long-accepted practice of using dual wills are being questioned, prolonging the process and adding to the legal costs for the clients.

“We know this process is acceptable, based on a 1998 Ontario court decision," Wahbi says. "Even the court forms were changed shortly after that ruling, which in effect acknowledged that this is an acceptable process.”

So the handful of endorsements on applications that question the tested approach to estate planning is causing some concern within the profession, she adds.

“It has been brought to the court’s attention by the bar. And we have been told that it’s being looked at and considered. But it’s quite shocking” says Wahbi.

The province’s increase of probate fees 20 years ago led to the use of primary and secondary wills as an estate-planning tool to segregate into a secondary will property that does not require the probate process for its administration and limit the probate application to the primary will only for assets dealt with by that will, she explains.

Originally, when a will was sent to the court to be authenticated, there was a minimal administration charge based on the value of the estate. But that changed in 1992, Wahbi explains.

The province tripled the fee from 0.5 per cent on the value of the estate to 0.5 per cent on the first $50,000 and 1.5 per cent on the balance, sending the cost for a $1-million estate to about $15,000.

In 1998 a Supreme Court of Canada decision held that the probate fees being charged by Ontario were in fact a tax, not a fee, and were therefore unconstitutional because such a tax must originate by a bill enacted by the legislature, not by regulation, Wahbi explains.

"The province responded with the Estate Administration Tax Act, which was later followed by similar legislation in many other provinces," she says.

The double-will approach segregating assets that don’t require probate, such as shares in private companies, was adopted as an estate-planning measure to mitigate the additional cost imposed by that tax, Wahbi says. Secondary wills can also address shareholder loans, personal effects, cars, as well as some land in Ontario that doesn’t need to go through probate for transfer.

"By having dual wills, not only are the probate fees reduced but privacy is maintained regarding those assets and the costly valuation process may be avoided," she adds.

“We started to go down the road of planning to avoid the probate process and associated probate fees. It became quite a significant way to avoid this whole process, both the added cost and the administration burden. And, in fact, the revenue generated to the province by probate fees went down, even though they tripled the fees.”

The estate bar has developed a number of solid rules to ensure the effectiveness of using multiple wills, Wahbi says. They included ensuring one document doesn’t revoke the other, appointing the same executor for primary and secondary wills to avoid any conflict in administration of the estate, ensuring the documents don’t duplicate gifts and establishing where the income tax gets paid from.

The court acknowledged the process when it changed the probate application form to ask if there was a secondary will, so its recent questioning of the multi-will approach is stumping estate lawyers, Wahbi says.

When the probate application is rejected by the court, the client incurs substantially more fees because it means the lawyer has to do more work. And the whole idea behind having multiple wills is to lower costs and make the process for assets that don’t require a probated will for their administration simpler, she says.

“Changing the practice mid-stream is a hardship to estates. The person’s dead, you can’t redraft the will,” Wahbi says. “The Toronto bar is waiting to see how this is going to be resolved.”

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