David Rosenthal


June 17, 2015

June 17, 2015

Many people do not like to discuss the topic of wills as it requires them to face their own mortality. Nevertheless, wills are critical legal documents and very important for tax, estate and family planning. It is recommended that you review your wills at least every five years to ensure your wills reflect your changing life circumstances.

If you die and do not have a will, the Ontario Succession Law Reform Act dictates how your estate is distributed. Your spouse is entitled to the first $200,000 of the estate. If your estate is larger than $200,000, your spouse will be entitled to one-half of the excess. If you only have one child, she/he will receive the other half of the excess. If you have more than one child, your spouse receives one-third of the excess and the balance is distributed equally to your children.

If you do not have a surviving spouse or children, your estate is distributed to your next-of-kin in a prescribed order, based on blood relationships. This may not be what you would wish, so it is important to have at least a basic will.

Typically, a will leaves the estate to your spouse. If your spouse predeceases you then the proceeds go to your children. If you have minor children (less than 18 years old), your will should state who you wish to be the guardian of your children and their property until they become of legal age. You should speak with this person before adding them as your guardian in your will to confirm they accept the responsibility. A will also identifies the estate trustee, the person who administers and distributes the estate. Typically the estate trustee is your spouse.

To have a valid will you must sign it in the presence of two witnesses, present at the same time, and they must sign in your presence. The witnesses, or the spouse of a witness, should not be a beneficiary under the will. If they are then the bequest to that witness, or to his or her spouse, is void.

If you have a will, it will be revoked by a subsequent marriage except where the will specifically declares that it is made in contemplation of marriage. Furthermore, in the event of divorce, the appointment of your spouse as an executor is revoked as is a bequest to your spouse of a beneficial interest in property. After a divorce your will is treated as if your former spouse had predeceased you.

When a person dies their will is, in most cases, filed at the Ontario Superior Court of Justice as part of the ‘probate’ process. There is an estate administration tax, which is calculated on the total value of the deceased’s estate wherever situated. That tax is 1.5 percent of the assets you are required to declare to the government. If your estate is $3,000,000, the tax will be slightly less than $45,000.

However, not all assets are required to be included in the list of assets attracting estate administration tax. With only one will, most of your assets will have to be included in the government filing and you will pay the fees on the total of that amount. But, if you have two wills, one can deal exclusively with assets that must be probated and you will pay the tax on this amount only.The other will (often called a secondary will) can deal exclusively with assets where probate is not required. Shares of a dentistry PC fall into this category. In the example above of a $3,000,000 estate, if the shares of your dentistry professional corporation are worth $2,000,000, then they can be dealt with in the secondary will. By doing so, the shares are excluded from the probate process and there is no estate administration tax on these assets. In this example your estate will save $30,000 in estate administration tax. Having a secondary will for your dentistry professional corporation can result in substantial tax savings.

This discussion of wills is quite brief and not detailed. Please seek the advice and guidance of a knowledgeable accountant and lawyer when you are ready to draft your will.