Multiple Wills—What They Are and How They Work
Multiple wills can help you direct how your assets will be distributed after your death and reduce fees on certain assets. In particular, they can reduce the costs associated with probate fees for assets not requiring a grant of probate. They are not recommended for everyone, but can represent significant savings to your estate in certain circumstances.
Understanding the Probate Process
Courts rely on the probate process to verify the validity of a will. Probate enables the executor to administer the assets according to the instructions set down in the will; it allows third parties, such as the land registry office or financial institutions, to release those assets to the executor named in the will. For all assets that pass through the will during the probate process, the estate has to pay probate tax as follows:
$5.00 for each $1,000 of assets in the estate up to $50,000 of assets; and
$15.00 for each $1,000 of assets in the estate over $50,000 of assets.
Adding up the numbers means that the estate would have to pay $1,500 for every $100,000 of assets after the first $50,000. However, not all assets need a grant of probate to be dealt with.
Real property (such as your house or cottage), investment accounts, and other financial assets usually require a grant of probate from the court before they can be passed on. By contrast, shares of a private corporation, jewelry, collectibles, or furniture may be able to be transferred without such a grant.
For example, it is unlikely that the person to receives their grandmother’s wedding ring is going to question whether the executor of the estate (perhaps their parent, aunt or uncle) had the right to give that asset to them.
By contrast, a financial institution might be reluctant to release the value of a bank account to the son or daughter of a deceased person without the protection of having the court confirm that the son or daughter is the properly named estate trustee; hence they will want to see a probated will.
Should You Create Multiple Wills?
Creating multiple wills can help you reduce probate fees. You can do this by creating a primary will for real estate and other assets that will need the grant of probate in order to be dealt with, and a secondary will for assets like shares in a private company, that will not need the grant of probate in order to be dealt with.
If all assets are to be dealt with under one will, the probate tax will be payable on the value of all assets. However, if we carve our certain assets from that primary will by creating a secondary will for those assets (such as the shares of a private company) then the estate will not have to pay the probate tax on the value of those shares or other assets.
Consider the following benefits and disadvantages of multiple wills to make an informed choice.
Benefits of Multiple Wills
Lower fees—if you have to transfer non-probate assets, multiple wills can help you reduce probate fees/probate tax.
Quicker transfer for some assets—you can transfer certain assets such as company shares without having to wait for the probate process to be complete.
More privacy—multiple wills enable you to keep the secondary will private. Because probate is a public process, anyone can request a copy of a probated will for a fee.
Disadvantages of Multiple Wills
Legal cost—multiple wills require careful planning to ensure that all assets in the secondary will will not require probate, and to ensure that one will does not revoke the other.
Longer wait—multiple wills usually take longer to draft than a single will since they require more care.
Higher claim risk—there is a limitation period in which people can challenge a will for which probate has been granted. That limitation period will not begin to run if the will is not probated.
Finding a trust company—trust companies who may be asked to act as estate trustees may require that a will be probated before they will agree to act.
Final Thoughts
Multiple wills can help you save time and money transferring certain assets, but they require judicious attention. If a single asset in the secondary will requires a grant of probate in order to be dealt with, the entire will must be probated, defeating the purpose of multiple wills. To use multiple wills effectively, you should consult with a lawyer who is well versed in the drafting of wills.