Each parent should have a will in order to simplify the administration of the estate and to ensure all property is distributed according to the testator’s wishes.

In addition to multiple wills outlined above, wills provide a number of tax planning opportunities. For example, gains may be deferred on death by using a spousal trust and charitable donations made in a will are deemed to be made in the year of death.

Testamentary trusts provide an opportunity for income splitting. Attribution does not apply to deceased individuals.

The will may provide for a trust for the surviving spouse, children and grandchildren in order to take advantage of the separate year end and graduated tax rates available to a trust under a will. For example, assume that a client has $10 million. The spouse and two adult children are in the top tax bracket. Each child has three minor children. Rather than leave the assets outright to the spouse, the will may provide, for example, that:

a) $2 million is held in trust for the surviving spouse;

b) $500,000 is to be held in trust for each child;

c) $300,000 is to be held in trust for each grandchild;

d) the balance is to be given outright to the surviving spouse.

After the death of the client, the estate may file separate annual tax returns for the trusts of the spouse, two children, and six grandchildren. Each trust benefits from graduated tax rates. Tax-free capital distributions may be made by the testamentary trusts to the beneficiaries.

If a parent resides outside of Canada and some of the children are in Canada, the will of the parent may provide for a trust to be administered outside of Canada following the parent’s death. The will may be structured so that Income may be accumulated free of tax (assuming that the investments do not attract tax) and tax-free capital distributions may be made to the Canadian resident beneficiaries.

If the parents own real estate in another country, it may be worthwhile to have a single purpose will in that country in order to avoid the complexity of translating and certifying a Canadian will in order to transfer the asset in the other country.

Residents of Ontario often plan to avoid the 1 1/2% Ontario probate fees. Assets generally requiring probate include bank accounts, brokerage accounts and personally held real estate located in Ontario. Planning may include naming beneficiaries in life insurance policies and pension plans in order that these payments be made directly to the beneficiaries and not form part of the estate. Ownership of investments such as bank accounts, residential property, brokerage accounts and even share of private companies can be in joint tenancy (not tenancy in common) in order to ensure that the survivor acquires the asset directly and not under a will. The normal rules regarding dispositions and attribution must be considered in restructuring ownership. Assets may be transferred to an ordinary inter vivos trust, a spousal trust, an alter ego trust or a joint and last survivor trust. Assets owned by a trust are not subject to probate fees. The tax consequences of the transfer to trust must be considered.

Finally, the use of multiple wills may accomplish the objective where there are shares and debt of a private company. The directors of a private company may transfer shares without a probated will. primary and secondary wills are executed. The primary will deals with bank accounts, land, etc., and all assets other than the assets dealt with in the secondary will.

The primary will is probated and probate fees of 1 1/2% of the value of the assets governed by the will must be paid. The secondary will deals exclusively with shares and debt of private companies and possibly other assets (e.g. art collections) and would not be probated. It is important that the dual wills are properly drafted. and executed. For example, the secondary will must be executed after the primary will and cannot revoke the primary will.

It may be possible to transfer assets to a spousal trust, alter ego trust, or joint and last person trust in order to defer or eliminate tax on death. The trust may be structured so as to benefit from lower tax rates.

Assume that the parent did an estate freeze of an investment company and that there is substantial refundable dividend tax on hand from investment income. The judicious use of a trust coupled with an increase in paid-up capital of the preference shares or a redemption of the shares over time will generate a corporate tax refund and reduce or possibly eliminate the tax on death. It can be structured so that the parent receives the desired cash flow while reducing the exposure to tax on death.