January 31, 2019

Meet the New Boss, Same as the Old Boss – The Dual Will Plan is still Good Planning

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A September 11th, 2018 decision of Justice Dunphy, Milne Estate (Re), 2018 ONSC 4174, was the source of some anxiety for trust and estate planners across Ontario. The Court held that the authority given to Estate Trustees to allocate assets between the Primary and Secondary Estates based on whether a grant of probate was required to transfer the asset (the “allocation clause”) was invalid. As a result the Court held the deceased’s Dual Will plan failed, and no Estate Administration Tax was avoided, thus rendering the primary purpose of the Dual Will plan useless.

This case was recently heard on appeal by the Ontario Superior Court of Justice, Divisional Court (Milne Estate (Re), 2019 ONSC 579). The Divisional Court held that Justice Dunphy’s determination that a Will is a trust was an error of law, and that while a Will has very specific requirements that must be met in order to be valid, it is not required to meet the three certainties which are required of trusts. The Divisional Court went even further and stated that even if they were wrong, and the Will was a trust and was required to meet the three certainties, the use of the allocation clause did not violate them. The ability of the Estate Trustee to allocate assets owned by the deceased to the Secondary Estate because these assets do not require a grant of probate was certain. It is an objective test which can be clearly applied to determine whether an asset does, or does not, fall into the Primary or Secondary Estate. To put it another way: either an asset does, or does not, require a grant of probate in order to be transferred or realized. There is no subjectivity here.

As a result, estate planners can breathe a sigh of relief. The authority given to Estate Trustees in dual Will plans to determine which assets fall under which estate (Primary or Secondary) based on whether such assets require a grant of probate in order to transfer, is still valid.

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