The Estate Information Return and Multiple Wills
Last year, a regulation to the Estate Administration Tax Act, 1998, S.O. 1998, c. 34, Sched. (the “EATA”) came into effect requiring estate trustees to file an Estate Information Return (“EI Return”) with the Ministry of Finance within 90 days after issuance of a Certificate of Appointment of Estate Trustee. The EI Return must include information with respect to the “value of the estate”. Under the EATA, this term is defined as “the value which is required to be disclosed under section 32 of the Estates Act (or a predecessor thereof) of all the property that belonged to the deceased person at the time of his or her death less the actual value of any encumbrance on real property that is included in the property of the deceased person.”
Section 32 of the Estates Act, R.S.O. 1990, c. E.21, among other things, provides in subsection (3) that “Where the application or grant is limited to part only of the property of the deceased, it is sufficient to set forth in the statement of value only the property and value thereof intended to be affected by such application or grant.” This means that any assets that are governed by a Will that is not being submitted for probate are not required to be disclosed on the EI Return. Accordingly, if an individual has multiple wills, any assets governed by their Secondary Will do not have to be disclosed on the EI Return.
Multiple wills are used in estate planning to deal with a testator’s assets and belongings that do not require a Certificate of Appointment of Estate Trustee to transfer and distribute, therefore avoiding the need to pay Estate Administration Tax on the value of those assets and belongings. With the introduction of the EI Return, there may be increasing motivation for testators to use multiple wills in their estate planning. In providing their valuation of the estate being administered, estate trustees will now be required to substantiate the valuation used. This may require formal valuations, such as appraisals, which may result in significant costs to the estate.
For example, if a testator has a number of pieces of art and jewelry, which can be transferred without a Certificate of Appointment, the estate trustee would be required to have appraisals performed on each piece in order to substantiate their valuation for the EI Return. In this situation, it may be more efficient, both in terms of cost and in terms of the time required to complete the formal valuations, to distribute those assets through a Secondary Will. Testators and solicitors should consider whether the costs of determining the value for each and every item or asset may be higher than the expenses involved in preparing multiple wills. It may be that, with the EI Return now in effect, a lower threshold for the value of a testator’s assets may justify an estate plan that involves multiple wills.
Thanks for reading.