Preparing Your Secondary Wills for Your Business Assets: A Complete Guide
In the realm of estate planning, many individuals are unaware of the potential benefits and complexities associated with secondary wills. While the concept of a primary will is familiar to most, a secondary will can serve as a valuable tool in reducing estate taxes and ensuring a smoother distribution of assets. In this article, we will delve into the importance of secondary wills in Ontario, exploring the reasons why they are necessary and how they can protect your estate and loved ones.
Understanding Primary Wills
Before diving into the intricacies of secondary wills, it is important to have a firm understanding of primary wills. A primary will is a legal document that outlines the distribution of your assets and appoints an executor to carry out your wishes after your passing. It typically addresses important aspects such as the transfer of property, guardianship of minor children, and the appointment of an executor.
The Probate Process
To comprehend the significance of secondary wills, it is crucial to familiarize oneself with the probate process. Probate is the legal procedure that validates a will and ensures its authenticity. This process involves proving the will in court and obtaining a certificate of appointment of estate trustee. Probate is often required for assets such as real estate, bank accounts, and investments.
The Role of Estate Administration Tax (EAT)
During the probate process, estate administration tax (EAT) is levied on the value of the estate. In Ontario, EAT is calculated starting on assets exceeding $50,000. The amount of EAT payable can be significant, especially for larger estates. This is where secondary wills come into play, offering a strategic approach to minimize or eliminate the impact of EAT.
What Are Secondary Wills?
A secondary will, also known as a multiple will strategy, is a legal document that addresses specific assets or types of property that do not require or benefit from the probate process. It allows individuals to separate their assets into different wills, with one will focusing on probate assets and the other on non-probate assets. By doing so, the secondary will can effectively reduce or eliminate the EAT payable.
Situations Where Secondary Wills are Beneficial
Business Owners
Business owners can greatly benefit from secondary wills, particularly if they own shares in an incorporated business. By establishing a secondary will, they can ensure that their business shares are dealt with separately and do not become part of their probated estate. This strategic approach can significantly reduce the EAT payable on the business assets.
Real Estate Owners
For individuals who own real estate, a secondary will can be instrumental in minimizing EAT. Certain properties, such as those registered in the older Land Registry system or qualifying for specific exemptions, may be eligible for inclusion in a secondary will. By carefully structuring their wills, real estate owners can protect their assets and reduce the tax burden on their estate.
High-Value Assets
Individuals with high-value assets, such as valuable artwork, jewelry, or collectibles, can also benefit from secondary wills. By including these assets in a separate will, they can ensure that they are not subject to probate and the associated EAT. This strategy allows for a more efficient and cost-effective distribution of these assets to beneficiaries.
The Process of Creating Secondary Wills
Creating secondary wills in Ontario involves careful planning and legal guidance. Here are the key steps involved in the process:
1. Consultation with an Estate Planning Lawyer: Seek the expertise of an experienced estate planning lawyer who specializes in secondary wills. They will assess your specific situation and provide tailored advice.
2. Asset Evaluation: Determine which assets can be included in a secondary will, considering factors such as the likelihood of probate and the potential impact of EAT.
3. Drafting the Secondary Will: Work closely with your estate planning lawyer to draft a legally sound secondary will that clearly outlines the assets it covers and the beneficiaries involved.
4. Coordination with the Primary Will: Ensure that the secondary will complements the primary will and does not conflict with its provisions. It is crucial to maintain consistency and avoid any ambiguity.
5. Execution and Review: Sign the secondary will in the presence of witnesses to validate its legality. Regularly review and update both the primary and secondary wills as circumstances change.
Benefits and Considerations
Benefits of Secondary Wills
The benefits of secondary wills are numerous and can have a significant impact on estate planning:
• Minimize EAT: By separating assets into a secondary will, individuals can reduce or eliminate the EAT payable on those specific assets.
• Efficient Distribution: Secondary wills facilitate a smoother distribution of non-probate assets, allowing beneficiaries to receive their inheritance without delays associated with the probate process.
• Increased Privacy: Unlike primary wills, secondary wills are not subject to public scrutiny, providing individuals with increased privacy regarding the distribution of specific assets.
Secondary wills play a vital role in estate planning for Ontario residents. They offer a strategic approach to minimize estate administration tax and ensure a more efficient distribution of assets. By separating assets into primary and secondary wills, individuals can protect their estate and loved ones while maintaining their privacy. If you are a business owner, real estate owner, or have high-value assets, consult with an estate planning lawyer to explore the benefits of secondary wills and secure your legacy for future generations.
Remember, estate planning is a complex and ever-evolving area of law, and seeking professional advice is crucial to ensure your wishes are accurately reflected in your wills. Reach out to Marwah Law’s estate team today to take the necessary steps today to protect your estate and provide peace of mind for your loved ones.
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