The purpose of this blog is to make you aware of a recent change in the law with regard to Wills.
The BC Wills Estates and Succession Act (WESA) permits “Multiple Wills” to be used to deal with the assets of a deceased person located in BC. The purpose behind creating Multiple Wills is to avoid the costs of applying for Probate of the Will.
Probate of a Will is a court process that confirms the validity of a Will and the Executor’s authority to act under it. If there are assets under the Will that are controlled by third parties such as the Land Title Office (real estate) or a financial institution (bank accounts), these parties are not usually willing to accept the Executor’s authority based solely on the Will. They require that the validity of the Will and the Executor’s authority also be confirmed by the Court. The process of securing that confirmation is called “Probate”.
Applying for Probate can be a cumbersome and often costly procedure. The Executor must list all of the deceased’s assets that are to be dealt with under the Will. There is also a tax associated with applying for probate of 1.4% of all assets that have been listed ($14,000 per $1,000,000).
Shares of closely-held private companies do not require the consent of third parties. The title of the shares is not controlled by a third-party, but rather by the company’s Directors. The BC Business Corporations Act specifically confirms that these Directors can authorize a transfer of the deceased’s shares based on the Will alone, without requiring a Probate of the Will. Shareholder loans due to the will-maker also do not require Probate.
It is for this reason that it may be advisable to create Multiple Wills. One Will shall deal with almost all of your assets (the “General Will”) and another Will can be created that deals exclusively with your private company shares and any shareholder loans that are due to you (the “Restricted Will”). By having the Multiple Wills, only the assets under the General Will would be subject to Probate which will allow you to avoid significant probate taxes on the value of your private company shares and shareholder loans (as these assets are covered off by the Restricted Will).
If you only have one Will that deals with all of your assets then the 1.4% probate tax would apply to all of the assets under the Will.
A Multiple Will estate plan can save a significant amount of probate taxes and can provide some privacy for company related matters. If you have significant assets in the form of private company shares or shareholder loans and you wish to save Probate taxes you should consider Multiple Wills. The savings in Probate taxes should significantly exceed the legal costs associated with preparation of the General Will and Restricted Will.