The Use of Multiple Wills and Milne Estate (Re)
A common estate planning practice in Ontario involves the use of multiple Wills, whereby a testator simultaneously executes a Primary Will and a Secondary Will, with the former covering assets that require probate (known in Ontario as a “Certificate of Appointment of Estate Trustee”) in order to be administered, and the latter dealing with assets that do not, such as shares in privately-held corporations or personal belongings.
This practice of separating one’s assets under two different Wills generally has the effect of reducing Estate Administration Tax (“EAT”, formerly and still sometimes referred to as “probate fees”), payable upon applying for probate, as it allows for one’s estate to pay the EAT only on assets that require probate to deal with them. The use of multiple Wills was judicially recognized in the 1998 case of Granovsky Estate v. Ontario, 156 DLR (4th) 557, and has since been widely utilized in the province.
While the multiple Wills strategy can be advantageous for many individuals—business owners in particular—in terms of probate tax savings and privacy (as non-probated Wills are not filed with the Court, they do not become public documents), it is not without risks and requires proper drafting. For example, such Wills must be carefully prepared to ensure that they do not inadvertently revoke each other or result in unexpected legal issues after death, such as those pertaining to tax and debt apportionment between assets of each Will, or bequests being duplicated.
A recent decision by Justice Dunphy in the case of Milne Estate (Re), 2018 ONSC 4174 is the latest reminder that those who are considering making multiple Wills should thoroughly consult with an estate planning lawyer in order to avoid unanticipated adverse consequences later on. This case concerned a mirroring pair of spousal multiple Wills which were drafted in a way that gave the executors the discretion to determine which assets fall under each Will (that is, to determine which assets require probate and which do not), instead of identifying specific assets covered by either Will. In other words, the multiple Wills in this case contained a so-called “basket clause,” which has long been widely used in many Wills to provide flexibility for situations in which an asset covered by a Secondary Will later requires probate, thus subjecting the Secondary Will (and all assets covered thereunder) to the probate process and the EAT.
Justice Dunphy took issue with the basket clause, finding such language to be too broad and unclear to identify the assets passing through the Primary Wills (which were submitted for probate and were thus at issue in this case). He stated that a Will, as a form of trust, requires, inter alia, certainty of its subject-matter in order to be valid. In other words, a valid Will must cover assets that are “specifically identified or are objectively identifiable” at the time of the testator’s death, and cannot leave it to Executors to retroactively determine what assets fall under which Will. Accordingly, Justice Dunphy held the Primary Wills to be invalid due to the lack of certainty as to their subject-matter.
Justice Dunphy’s decision, with its potentially significant impact on thousands of existing multiple Wills containing basket clauses, was immediately and widely criticized by many leading estate practitioners and commentators as wrongly decided and inconsistent with the line of cases following the Granovsky Estate case. The decision, in fact, was appealed to the Ontario Divisional Court. Moreover, a subsequent decision by Justice Penny in the similar case of Panda Estate (Re), 2018 ONSC 6734 directly rejected Justice Dunphy’s reasoning as being “incorrect as a matter of law.”Specifically, Justice Penny stated that a Will is not a form of trust and therefore does not require certainty of its subject matter to be valid. Rather, a Will is a “unique instrument” and “its own, unique creature of the law.” Given these opposing decisions on the issue of basket clauses, it was now up to the Ontario Divisional Court to address and resolve such uncertainty at law through its appellate review of Justice Dunphy’s decision.
On January 24, 2019, to great relief, the Ontario Divisional Court released its unanimous decision reversing Justice Dunphy’s decision. The appellate Court agreed with Justice Penny in that a Will is not a trust and thus does not require, inter alia, certainty of its subject-matter in order to be valid. The Court further noted that even if a Will were a trust, the multiple Wills in question would nevertheless be valid, as such requirement was still met.
Accordingly, the practice of using basket clauses for multiple Wills remains sound. Nonetheless, the case of Milne Estate (Re) serves as an important reminder that one should regularly review his or her existing Will with an estate lawyer to ensure that, in light of the constantly-changing laws, it remains up-to-date and effective to carry out his or her testamentary wishes.