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The Benefits of a Corporate Will (Secondary Will)

A common question that is asked by many incorporated business owners is what they can do to minimize paying government taxes. As advisors, we’re prepared to promote the virtues of permanent life insurance as an efficient tax planning solution given its tax-preferred status: tax-free during the growth/accumulation phase and virtually tax-free during the final distribution phase (via the capital dividend account). But we sometimes forget to mention the importance of a secondary will/corporate will.

If you live in either Ontario or British Columbia, a multiple wills strategy (both primary and secondary) may just be what the doctor ordered to help manage the ever-increasing probate fees. For instance, when owning shares in a private corporation in either of these two provinces you should consider a secondary/corporate will. Conversely, while Nova Scotia currently has the highest probate fees in Canada, having a secondary/corporate will is not even permitted under current legislation. For Canadians outside B.C or Ontario, it can apply to the property you own in either of these two provinces. Even if there’s a shareholder agreement in place that specifies what happens to the shares on the death of a shareholder, a secondary will is still effective in eliminating unnecessary probate fees on the proceeds.

So, here’s how it works! You have one will (primary will) to administer the distribution of your assets that require probate (more on that later) and a secondary will to administer assets that don’t. If you live in a province where probate fees are not a material concern, this may not matter. But if you live somewhere like B.C or Ontario where probate fees are currently 1.4% and 1.5% respectively, it’s worth being aware of a multiple will strategy.

So, what is Probate?

To be able to fully administer your estate, your executor may need the court to officially declare the will valid. This process comes at a fee, tax, cost…whatever you want to call it. Once your will is validated, the courts issue a “Certificate of Appointment of Estate Trustee” giving the executor authority to act on behalf of a deceased person’s estate. Third parties (such as land title registries and financial institutions) rely on this certificate as proof of the executor’s authority before releasing assets to the executor.


Assets that DO REQUIRE PROBATE and are therefore administered through a “Primary Will”:

  • Assets registered in a single name such as: • individual non-registered investment, savings, and chequing accounts. • real property registered solely in the name of the testator; and • personal property (e.g. automobile, boat, plane) registered solely in the name of the testator.

  • Registered plans and insurance where the estate is the named beneficiary.


Assets that DON’T REQUIRE PROBATE and are therefore administered through a “Secondary Will”:

  • Assets that do not have a registered title.

  • Shares in private corporations and related shareholders’ loans and receivables.

  • Household goods and personal items such as antiques, paintings, jewelry (except those held in a safety deposit box which may require probate to access the box)

  • Unsecured debt.


Other assets that DON’T REQUIRE PROBATE AND don’t require any Will:

  • Assets held Jointly (with right of survivorship) such as real estate property, bank accounts, etc. pass directly to the surviving owner bypassing the estate.

  • Assets with ‘named beneficiaries’ such as life insurance, RRSP/RRIF and TFSA accounts, and non-registered segregated funds.

  • Assets held in a trust.


What are the advantages of having a Secondary/Corporate Will?


               Saving money: if you have a business worth $5mill in Ontario, having a corporate will to administer the distribution of these shares will save your estate $75,000 ($ 5 million X 1.5%). Although you don’t pay probate fees on the first $50K, we’ll assume that exemption was used up in your primary will.


               Privacy: Given the process an executor must undertake to validate a “primary will” (application to the courts, and potential court hearings), the contents of the will are available to the public for viewing. This is not the case with a corporate/secondary will.


               Saving time: using a corporate will can help your business easily continue after you’re gone. The probate process can a considerable amount of time. Even if there are no issues relating to your application and/or disputes, it can still take several months to a year(s) to administer. With a corporate will, your corporate interest can be transferred quickly, resulting in minimal disruption to your business.



What happens if you die without a Corporate Will?


Potentially three scenarios can occur:


1.   If your existing “primary will” deals with your corporate interest (i.e. stating who inherits the shares of the corporation), they will be carried out in the terms outlined. In this case, the value of your corporate interest will be subject to probate fees with the rest of your estate. NOT GOOD!


2.   Even worse…what if you don’t have “any” will! In this case, your estate is considered “intestate” and will be dealt with in terms outlined in your province's intestate guidelines. In Ontario, this falls under the “Succession Law Reform Act.” This means that along with the rest of your assets, your corporate interests will be distributed under the following priority, depending on who survives the deceased: (Spouse, children, parents, siblings, nieces/nephews, other next of kin, and The Crown). Not only will this division of assets not align with your unwritten wishes, but it will also still be subject to probate fees and potentially, more delays. AGAIN, NOT GOOD!


3.   Suppose you have a “primary will” that doesn’t even mention your corporate interests. In this case, your private shares may fall into the ‘residue’ of your estate, and ‘intestate guidelines’ may apply with probate fees attached (as #2 above).


What are the potential disadvantages of a secondary/corporate will:


The legal fees to create two wills may be significantly higher than the cost of creating one will. Unless the ‘non-probate’ assets are substantial, the costs of implementing two wills could exceed the benefits. This is usually not the case with shares of privately owned corporations.


The legal language must also be very accurate to ensure that one will doesn’t revoke the other or in the case of “Simpson vs Simpson Estate BC,” the will doesn’t revoke or align properly with other legal instruments such as a shareholder agreement (Wills and shareholder agreements – they must work together! ( This is a problem even if you only have a primary will and a shareholder agreement.


Other considerations:


There may be circumstances when you may consider a third, fourth, and even fifth will. Individuals with foreign assets may consider a third will to deal with their assets in foreign jurisdictions which may be subject to probate tax in those jurisdictions. By removing assets in a foreign jurisdiction from a primary and secondary will, the individual’s foreign assets governed by this third will can be administered without delay of obtaining probate of the primary will first.


Depending on the situation, a corporate will can be a useful strategy for avoiding probate fees/taxes. Remember that estate planning is a complex matter and the information covered here is a general overview. Since laws and regulations change over time it is imperative that you consult with professionals who are knowledgeable about the specific laws in your jurisdiction.



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