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Private company shares can be handled separately
Dual Will planning requires careful implementation; for example, it only works if the will-maker ensures that different executors are named in each Will.
Estate planning is one of the areas of law that has grown increasingly complex. Planning for B.C. residents should include a consideration of payment of probate fees, being approximately 1.4 per cent of the value of the estate (or $14,000 on every $1,000,000 of assets).
Ingrid Tsui, partner and leader of Alexander Holburn Beaudin + Lang LLP’s Wills, Estates + Trusts practice, says, “B.C. is a high-tax jurisdiction. Considering our real-estate values are rising, the probate fees can be substantial—to the point where finding money to pay the fees and obtain probate is difficult.”
That’s why Tsui often advises clients who own shares in a private Canadian company to undertake dual Will planning.
Under this structure, the same will-maker has one Will for his or her private company shares, and another Will for the remainder of the will-maker’s assets requiring probate (such as bank accounts and real estate).
The end goal is to avoid probating the Will dealing with the company, therefore saving probate fees on these assets which would be otherwise payable by the estate.
Tsui stresses that dual Will planning requires careful implementation; for example, it only works if the will-maker ensures that different executors are named in each Will. “This is because the executor of the Will for assets to be probated must swear an affidavit listing all of the assets that the executor is dealing with as part of the estate,” she explains. “Therefore, that executor needs to swear that the assets being dealt with by him/her do not include private company shares.”
If set up properly, a person who owns shares of a private company (such as a family holding company), can avoid the probate process altogether and the associated fees. “This is because the remaining or replacement directors of a private company may waive the requirement to obtain a Grant of Probate,” says Tsui. “The thing to remember is that probate is only required if the institution holding the asset requires this; the replacement directors are entirely free to waive the requirement.”
The probate fee savings will typically offset the additional legal fees associated with preparing a second Will. But there are other advantages to this strategy apart from it being a solution to paying probate fees. “Applying for probate also causes delays and loss of privacy, because estate assets and their values are listed in the filed documents, which are publicly accessible,” says Tsui.
Dual will planning can be complex, and in some cases third wills are recommended when assets exist offshore. Alexander Holburn, a multi-discipline firm whose 75-plus lawyers are proficient in over 25 discrete legal subject areas, simplifies the legal process for clients, whether it be an individual or business.