Wednesday, April 19, 2017

Supreme Court of B.C Decision Lends Support to Use of Multiple Wills to Reduce Probate Fees

A recent Supreme Court of British Columbia decision has lent support to the strategy of reducing probate fees by making two wills in British Columbia, one that deals with those assets that may be transferred to your personal representative without a grant of probate, and the other that deals with assets requiring a grant of probate. This strategy of probate fee reduction has been successfully employed in Ontario, and because of wording changes to the legislation in British Columbia when the Wills, Estates and Succession Act came into effect, is utilized more frequently in British Columbia. 

Suppose you own shares in a company that is not traded on a stock exchange, and the company is used for a family business. Let’s say your interest in the company is worth $10 million. You also have a house in your own name, worth $700,000 and some investment accounts worth $1 million. You then have two wills, one of which deals with your interest in the company (we will call it the “Secondary Will”), and the other which deals with your other assets, including your home and investment accounts (the “Primary Will”). You name a different executor in each of the wills (an important detail in British Columbia). 

On your death, your executor of your Secondary Will does not apply for probate; the shares may be transferred into his name as the executor without a grant of probate. But the executor of your Primary Will, for which a grant of probate is required to transfer the assets into her name as executor to deal with them, probates that will. The executor of the Primary Will pays probate fees on those assets, but not the company. If the executor of the Primary Will is not required to pay probate fees on your interest in the company, and the executor of the Secondary Will does not need to probate the Secondary Will, then this will save $140,000 in probate fees (really a probate tax if the government were honest about it), when contrasted to the probate fees if you had only made one will.

In reasons for judgment issued on April 13, 2017, in Berkner(Estate), 2017 BCSC 619, Master Wilson held that an executor of a will dealing with some of the will-maker’s assets, the Primary Will in our example, without applying to probate the Secondary Will.

Master Wilson set out the background as follows:

[1]             Norman Frank Berkner (the “Deceased”) died on February 24, 2016. He was predeceased by his spouse and left one child, the applicant, Shelley Dorothea Berkner.
[2]             The Deceased’s estate plan utilized two wills, both dated January 28, 2016. The applicant is the executor under what is referred to as the Primary Will, but is not the executor under the Secondary Will as she renounced her executorship. The executor under the Secondary Will is an accountant, Mr. Robert L. Gruber.
[3]             This application is for a grant of probate of the Primary Will only.
[4]             The Secondary Will identifies those assets that comprise the Secondary Estate at paragraph 4(g) which provides as follows:

4.   In this Will:
      (g)  “Secondary Estate” means collectively:
            (i)   all Private Businesses;
            (ii)  any assets held in trust for me by the Private Businesses;
            (iii) any beneficial interests I may have in any trust for which a Grant is not required for a transfer or realization;
            (iv) any interest I may have in any real property for which a Grant is not required for the transfer or realization;
            (v)  all articles of personal household and domestic use or ornament belonging to me at my death for which a Grant is not required for a transfer or realization;
            (vi) any amounts owing to me from my children; and
            (vii)      any other assets for which my Secondary Trustee determines a Grant is not required for a transfer or realization;
            but excludes my property comprising my Primary Estate; provided that my Secondary Trustee may exclude an asset from being part of the Secondary Estate, in which case it shall become part of the Primary Estate;
      (h)  “Private Businesses” means and includes all securities of private companies or partnerships (which, without limiting the generality of the foregoing, shall include shares, bonds, debentures, notes, receivables, book entries, amounts owing to me, investments in and all other interests in private companies) I may own legally or beneficially at the time of my death and “private companies” for the purposes hereof including, but not limited to, the following:
            - Berkner Egg Farms Ltd.;
            (the “Company”), and any company which is a successor to the Company, or has amalgamated or as a result of any reorganization become a part thereof, and does not include any shares or other interest I may own of a publicly traded company;
[5]             I understand the deceased’s interest in Berkner Egg Farms Ltd. to have significant value.
[6]             All of the deceased’s assets that do not form a part of the Secondary Estate fall under the Primary Will. Although this application is for probate of the Primary Will, no application has been brought, and I infer no application is contemplated, for probate of the Secondary Will. The applicant applied for probate of the Primary Will by way of desk order in the ordinary course, but the Registry required that the matter be spoken to, a process contemplated by Rule 25-4(6)(b) of the Supreme Court Civil Rules.
[7]             The applicant submits that she should be granted probate of the Primary Will because:
a)    a will maker is permitted to make more than one valid will;
b)    a personal representative is not required to probate a will;
c)     in the absence of any rules or legislation that prevents multiple wills or requires that all wills be probated, she is entitled to the order sought.
[8]             For the reasons set out below, the applicant is granted probate of the Primary Will.
Master Wilson agreed with the applicant, represented by Geoff White, that a will-maker may make more than one will, and there is no requirement to probate a will. In granting the application to probate the Primary Will, without applying for a grant of the Secondary Will, Master Wilson applied the Ontario decision in Granovsky Estate v. Ontario, 1998 CanLII 14912, as follows:

[18]         The applicant says that since multiple wills are permitted at common law and there is no obligation on the part of Mr. Gruber to apply for probate of the Secondary Will, the applicant is entitled to the order granting her probate of the Primary Will.
[19]         In Granovsky, the dispute was between the administrator of the primary will and the Province of Ontario on the question of whether probate fees were payable on the entire estate. At paras. 23 and 26 of Granovsky, the court considered the legislative scheme in Ontario and concluded that multiple wills are permitted in Ontario, that limited grants of probate are available and there was no need to probate the second will:

23.        The estate planning of having multiple Wills in the form of a Primary Will and a Secondary Will which take effect on death is, in my view, simply another example of how a careful testator plans to have her or his estate pay the least possible probate fees on death. There is no legal obligation to obtain probate and, as I have noted above, limited grants are permissible. If the directors of the private companies in which the deceased owns shares or has an interest at death do not require the formal grant from the Court to deal with the transmission of the assets and are prepared to deal with the estate trustees named in the Secondary Will, why then should the estate have to pay probate fees on those assets?

26.       … In my view, there is no legislative prohibition against asking the Court for a limited grant of the deceased's Primary Will and I find that there is no requirement for the Estate Trustees to submit the deceased's Secondary Will to probate or to pay probate fees on the value of the assets governed by it.
[20]         The question of probate fees is not before me on this application, and no notice of this application was provided to the Province of British Columbia.
[21]         Turning to the legislation of this province, I find support for the applicant’s position that she be entitled to a grant of probate over what amounts to only a portion of the deceased’s estate can be found in s. 136 of the Wills, Estates and Succession Act, S.B.C. 2009, c. 13, which states:

136      A representation grant, whether or not power is reserved to another person to apply for a subsequent representation grant, gives to the personal representative exclusive authority to administer the estate or that part of the estate to which the representation grant applies in accordance with its terms.
[Emphasis added]
[22]         In my view, this section contemplates that a grant may be issued for something less than the entirety of the deceased’s estate.

Subject to Master Wilson’s comment that the issue of probate fees was not before him on the application, this decision lends support to the view that the multiple-strategy may be an effective way to reduce probate fees on death in appropriate circumstances. That said, I am concerned that the multiple-will strategy has become a bit of the flavour of the day in British Columbia, and there are pitfalls and lots of room for error, but I will save that for other posts. 


Michael Teddiman said...

Fascinating. But a few questions left unanswered. What of the second will? Is it to be probated? If the beneficiary of the second will was never notified what are the time constraints? If the secondary will with its assets was never probated what did the cort do with those assest? Appropriate them? Did this decision to probate one will only effectively rob Norman of his last request and his beneficiarie?
Thanks for the time it takes to answer my question I am grateful.
Sincerely Michael Teddiman.

Stan Rule said...

The executor of the Secondary Will is still required to distribute the assets in accordance with the Secondary Will. The grant of probate confirms the validity of a will and the authority of the executor. In some cases it is necessary or advisable to probate a will, but in this case the executor is in a position to administer the Secondary Will without a grant of probate. It is not the court that deals with the assets but the executor. This kind of strategy is only advisable in circumstances where the will-maker has a great deal of confidence in the executors and there is little likely-hood of conflict among the beneficiaries and executors.