In our Alert of October 2018, we informed you of the decision of Justice Dunphy of the Ontario Superior Court of Justice in Re Milne Estate, which brought into issue the validity of certain language commonly used in multiple wills, often referred to as “Primary and Secondary Wills”. We are pleased (and relieved) to inform you that Justice Dunphy’s decision in Re Milne Estate has been overturned.
Primary and Secondary Wills are widely used as an estate planning technique to minimize Estate Administration Tax (probate fees) that may be payable on death. Primary and Secondary Wills separate a person’s assets into two groups: assets which require probate in order to be dealt with, which are governed by the Primary Will; and assets which do not require probate in order to be dealt with, which are governed by the Secondary Will.
In Re Milne, Justice Dunphy found a Primary Will to be invalid because the Will contained a clause which provided the executors with the power to determine which assets are governed by each Will. In Justice Dunphy’s view, this created uncertainty as to which assets are governed by each Will, which invalidated the Primary Will. This decision caused a great deal of concern as to the validity of existing Primary and Secondary Wills containing the provisions in question.
As Justice Dunphy’s decision had a wide-ranging impact on the existing estate planning of many people in Ontario and the future drafting of Primary and Secondary Wills, the hearing of the appeal of Re Milne was expedited and heard by the Ontario Divisional Court in December 2018.
The Divisional Court released its judgment on January 24, 2019, allowing the appeal and overturning the decision of Justice Dunphy.
In its decision, the Divisional Court confirmed that the use of Primary and Secondary Wills remains a valid estate planning technique “to reduce [probate fees] payable… to avoid the delay associated with obtaining a Certificate of Appointment [probate] or preserve privacy in respect of certain assets.”
The Divisional Court found that Justice Dunphy’s key finding, that “a Will is a form of trust”, is an error of law. The Divisional Court also found that, if it is wrong and a Will is a form of trust, a clause which provides the executors with the power to determine which assets are governed by each Will does not create uncertainty, as there is an “objective basis” to ascertain which Will governs a particular asset; namely, whether probate is required to deal with the particular asset.
This decision is welcome news as it reaffirms the use of Primary and Secondary Wills as an effective estate planning technique and provides clarity as to the proper drafting of Primary and Secondary Wills.