As our blog has previously noted, Ontario has a significant Estate Administration Tax, being 1.5% of an Estate’s value in excess of $50,000. Across Canada, only Nova Scotia has higher estate fees, at more than 1.6% for Estates with an aggregate value in excess of $100,000.
Consequently, even with modestly sized estates, the tax burden can add up quickly. For those who hesitate to have a Will made due to cost, the reality is that having a well-considered estate plan quickly becomes the fiscally prudent choice. Thoughtful designations of property and management of assets within a family can result in considerable tax savings to beneficiaries.
One method that has been recognized in Ontario’s courts is the use of multiple Wills. Through this estate planning tool, assets such as shares in a privately-held corporation can be passed to beneficiaries without requiring probate. The assets requiring probate (and then being potentially subject to estate taxes) are governed by a separate ‘Primary’ Will. By bifurcating the estate assets into two separate Wills, the testator can pass their assets in a manner that minimizes the tax burden payable.
However, some estates can take years to administer – what happens with a secondary Will whose estate trustee seeks to be replaced?
The most straightforward is found at subsection 37(1) of the Trustee Act, which provides that:
37(1) The Superior Court of Justice may remove a personal representative upon any ground upon which the court may remove any other trustee, and may appoint some other proper person or persons to act in the place of the executor or administrator so removed.
So, while the Court may replace an Estate Trustee of a Secondary Will – will it do so without requiring probate (and thus negating the tax planning of a Secondary Will)?
The answer is that this can be done. In the 2000 decision of Carmichael v. Carmichael Estate, the Court held that an Estate Trustee may be replaced without first obtaining probate of the Will. This decision, made shortly after the landmark 1998 decision of Granovsky Estate v. Ontario, which recognized the validity of multiple Wills’ use for tax planning purposes. Accordingly, the Carmichael decision is applicable where a core consideration in changing trustees is the preservation of tax savings to the Estate.
So, for an Estate Trustee who seeks for their own replacement, the tax planning can be saved! An Order should be sought pursuant to subsection 37(1) of the Trustee Act, and to be prudent, this should be done in conjunction with an Application to pass their accounts for the period of trusteeship.
Thanks for reading!