Will, Executors, Powers of Attorney

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In Ontario, Wills, Executors (referred to as "Estate Trustees" in Ontario), and Powers of Attorney (POAs) are distinct but interconnected legal tools within the realm of estate planning. Understanding their specific roles and how they interact is crucial for ensuring your wishes are respected and your affairs are managed efficiently.

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Wills in Ontario

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A Will in Ontario is a legal document that dictates how your property will be distributed and who will manage your estate after your death. Seniors and our Friends Over 55 should all have or be in the process of getting a valid WILL set up.

 

Key Requirements for a Valid Will in Ontario:

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To be considered valid in Ontario, a will must generally be a written document, signed by an individual at least 18 years old and of sound mind, in the simultaneous presence of two witnesses who are not beneficiaries or their spouses; alternatively, a fully handwritten and signed "holographic will" requires no witnesses.

 

The will should also appoint an Executor/Estate Trustee and can name guardians for minor children, as dying without a valid will (intestacy) means assets will be distributed according to the Succession Law Reform Act, a process that might contradict personal wishes and incur greater expense and complexity.

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• Written Document:

  • Must be in writing (typed or handwritten). Electronic wills are not yet legally recognized.

• Age:

  • You must be at least 18 years old (with some exceptions for married individuals, those in the military, or emancipated minors).

• Mental Capacity ("Sound Mind"):

  • You must be of sound mind, understanding the nature and effect of signing a Will, the extent of your property, and who your beneficiaries are.

• Signature:

  • You must sign the Will at the end.

• Witnesses (for Formal Wills):

  • Most Wills are "formal wills" and require two witnesses.

    • You must sign in the presence of two witnesses, who are both present at the same time.

    • The two witnesses must also sign the Will in your presence.

    • Witnesses cannot be beneficiaries in the Will, nor can they be the spouse or common-law partner of a beneficiary. If a beneficiary or their spouse witnesses the Will, the gift to that beneficiary might be invalid, though the rest of the Will generally remains valid.

    • Virtual Witnessing: Since the pandemic, Ontario has allowed for virtual witnessing of Wills, provided at least one of the witnesses is a licensed Ontario lawyer or paralegal, and all parties can see, hear, and communicate with each other in real-time.

• Holographic Wills:

  • Ontario also recognizes "holographic wills," which are entirely handwritten by the testator and signed by them. These do not require witnesses. However, they can be more susceptible to challenges if not clearly written or if they don't fully express testamentary intent. For complex estates, a formal will drafted by a lawyer is always recommended.

• Executor/Estate Trustee Appointment:

  • Your Will names your Estate Trustee(s) (Executor(s)) to manage your estate.

• Guardianship:

  • If you have minor children, you can name a guardian for them in your Will.

• No Will (Intestacy):

  • If you die without a valid Will in Ontario, your estate will be distributed according to the rules set out in the Succession Law Reform Act. This means your assets go to specific family members in a prescribed order (spouse, children, parents, siblings, etc.), which may not align with your actual wishes. It also typically involves the court appointing an Estate Trustee, which can be a more complex, lengthy, and expensive process.

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Why Have Dual Wills?

 

To help you understand and consider things to know about setting up and the legal rules surrounding a multiple (or dual) Will strategy in Ontario, including the need to set up a Dual Will strategy if your primary residence qualifies for the First Dealings Exemption.

 

1. What is a Dual Will Estate Plan Strategy?

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A Dual or Multiple Will Strategy involves a testator (the person making the Will) creating two or more separate, co-existing Wills to manage different categories of assets.

 

The Wills are typically structured as follows:

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• Primary Will (The "Probate" Will): 

  • The first will deals with assets that must go through the court probate process for the Estate Trustee (Executor) to get legal authority to deal with them.  This should cover assets like your bank accounts, publicly traded investments (stocks, bonds), real property that is not jointly owned and does not qualify for the First Dealings Exemption, as well as any other assets that needs to go through the probate process. 

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• Secondary Will (The "Non-Probate" Will):

  • The second Will deals with assets that can be legally transferred without applying for a Certificate of Appointment of Estate Trustee (Probate).  This potentially could include assets such as shares in a private corporation, loans or debts owed to the deceased, certain household and personal effects (art, jewellery), and, strategically, real property that qualifies for the First Dealings Exemption.

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****** The Primary Will is submitted to the court for probate; the Secondary Will is not.

 

2. Why Set Up a Dual Will Strategy? (The Primary Motivation)

 

The overwhelming reason for using a dual will strategy in Ontario is to minimize or eliminate Estate Administration Tax (EAT).

 

Estate Administration Tax (EAT)

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• EAT Rate:

  • The EAT is essentially a tax on the value of the estate assets that pass through the probate process. In Ontario, the fee is approximately 1.5% of the estate value (e.g., $15 for every $1,000) above the first $50,000.

• The Savings:

  • By segregating all non-probate-required assets into the Secondary Will, the total value of the estate submitted for probate (under the Primary Will) is significantly lower, resulting in substantial tax savings.

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Other Benefits of using Multiple Wills

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• Confidentiality/Privacy:

  • A Will that is probated becomes a public record. The Secondary Will, which covers private assets like shares in a family business, is not probated and therefore remains private and confidential.

• Speed/Efficiency:

  • Assets covered by the Secondary Will can often be transferred to beneficiaries much faster, as they do not have to wait for the court's probate certificate.

• Jurisdiction:

  • Dual Wills can also be used when a person owns assets in multiple jurisdictions (e.g., an Ontario Will for Canadian assets and a separate Will for US assets) to simplify administration in each country.

 

3. Legal Rules and Requirements

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To ensure a Dual Will Strategy is effective, the following legal rules must be strictly adhered to:

 

A. Intention and Coordination

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• The Wills must be drafted carefully so that the execution of the later Will does not implicitly revoke the former. Each Will must contain an explicit clause stating that it only deals with the assets listed within it and is intended to co-exist with the other Will(s).

• There must be no overlap or conflict regarding the assets covered by each Will.

 

B. Allocation Clause (The "Basket" Clause)

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• Most Dual Wills contain an allocation clause (or "basket" clause) in the Secondary Will. This clause typically includes assets that do not require a Certificate of Appointment of Estate Trustee for a transfer.

• The validity of these clauses has been tested in Ontario courts, but the general consensus remains that, when drafted properly, the strategy is valid. It is critical that the clause provides an objective basis for the Estate Trustee to determine which Will governs which asset.

 

C. Formal Validity

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• Both the Primary and Secondary Wills must meet all the legal requirements for a valid Will under the Succession Law Reform Act (e.g., in writing, signed by the testator, witnessed by two persons present at the same time).

 

4. The First Dealings Exemption (FDE)

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The First Dealings Exemption is a specific and powerful rule that allows for certain Ontario real estate to be transferred without requiring the Will to be probated, making it an excellent candidate for inclusion in the Secondary Will.

 

A. What the First Dealings Exemption Is:

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The FDE is an exemption that applies to real property that has been converted from Ontario's older Registry System to the current Land Titles System, but has never been "dealt with" (transferred or sold) since that conversion.

 

B. Requirements for a Property to Qualify

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To be eligible for the FDE, the property must meet strict historical and current criteria:

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1. Original System: The property must have been acquired by the current owner when it was registered under the older Registry Act system.

2. Conversion: The property must have been later converted (usually automatically by the government) into the modern Land Titles System.

3. Land Titles Conversion Qualified (LTCQ) Status: The title must carry the designation Land Titles Conversion Qualified. If the title has been upgraded to "Land Titles Absolute," the exemption is lost.

4. No Prior Dealing: The transaction being undertaken by the estate must be the property's "first dealing" since the conversion.

   • "Dealing" generally means a change in ownership (e.g., a sale or transfer).

   • NOT a "Dealing" (and therefore does not disqualify the property) typically includes registering a mortgage or a survivorship application (if the property was held in joint tenancy and one owner passed away).

 

C. How the First Dealings Exemption Works with Dual Wills

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• If a property qualifies for the FDE, the Estate Trustee can generally transfer the property to the beneficiary without waiting for the court to issue a Certificate of Appointment (Probate).

• Crucially, to save the EAT on the value of the property, the property must be governed by the Secondary Will.

• By placing the property in the Secondary Will, its high value is excluded from the calculation of the EAT payable on the Primary Will, even though the transfer itself is being registered through the exemption.

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Estate Trustees (Executors)

in Ontario​

 

In Ontario, the term "Executor" has largely been replaced with Estate Trustee (or Estate Trustee With a Will/Without a Will, depending on the situation). This person is the legal representative appointed in your Will (or by the court if there's no Will) to manage and distribute your estate according to your instructions or the law.

Seniors and our Friends Over 55 should have thought through who they should have as Estate Trustees (Executors) during the process of setting up their WILL.​

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Key Duties and Responsibilities of an Estate Trustee (Executor/Executrix) in Ontario:

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The Estate Trustee has a fiduciary duty to act honestly, in good faith, and in the best interests of the estate and its beneficiaries.

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The duties of Estate Trustee in Ontario include:

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In Ontario, an Estate Trustee (Executor) is tasked with a comprehensive set of responsibilities to manage a deceased person's affairs according to their will or the law. These duties typically include locating the most recent will, arranging funeral details, obtaining death certificates, and meticulously identifying and valuing all assets and liabilities.

 

The Trustee must often apply for a Certificate of Appointment of Estate Trustee (probate), paying the associated Estate Administration Tax, to gain legal authority over the estate. Key ongoing tasks involve managing and protecting estate assets, paying all legitimate debts and taxes—including filing necessary income tax returns and obtaining a CRA Clearance Certificate to avoid personal liability—and maintaining meticulous records.

 

Finally, the Estate Trustee is responsible for communicating with beneficiaries and ultimately distributing the remaining assets, while also being entitled to reasonable compensation for their diligent work.

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• Locating the Will:

  • Finding the most recent and valid Will.

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• Arranging the Funeral:

  • While family usually handles this, the Estate Trustee has the legal authority to approve or make arrangements.

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• Obtaining Death Certificates:

  • Getting certified copies of the death certificate.

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• Identifying and Valuing Assets:

  • Locating, securing, and inventorying all assets (real estate, bank accounts, investments, personal property, digital assets, etc.) and liabilities (debts, mortgages, loans).

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• Applying for a Certificate of Appointment of Estate Trustee (Probate):

  • This is often required, especially if the deceased owned real estate solely in their name, or if financial institutions require legal proof of the Estate Trustee's authority. This involves filing an application with the Ontario Superior Court of Justice. Estate Administration Tax (formerly "probate fees") is payable on the value of the estate when applying for this certificate.

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• Managing Estate Assets:

  • Protecting assets, collecting income (e.g., rent, dividends), paying ongoing expenses (e.g., mortgage, utilities, insurance).

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• Paying Debts and Taxes:

  • Paying all legitimate debts of the deceased and the estate, including final income tax returns for the deceased (T1 terminal return) and the estate (T3 trust return), and obtaining a Clearance Certificate from the Canada Revenue Agency (CRA) before distributing assets. This is critical to avoid personal liability for the Estate Trustee.

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• Maintaining Records:

  • Keeping detailed and accurate accounts of all transactions related to the estate.

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• Communicating with Beneficiaries:

  • Keeping beneficiaries informed about the estate's progress.

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• Distributing Assets:

  • Distributing the remaining assets to the beneficiaries as per the Will or the Succession Law Reform Act.

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• Compensation:

  • Estate Trustees are entitled to reasonable compensation for their time and effort, usually around 2.5% of the capital and 2.5% of the income of the estate, but this can vary depending on the complexity of the estate and the work involved.

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Powers of Attorney (POAs)

in Ontario

 

A Power of Attorney (POA) in Ontario is a legal document that allows you (the "Grantor" or "Donor") to appoint someone (your "Attorney," who doesn't have to be a lawyer) to make decisions on your behalf while you are alive. POAs become invalid upon your death. Seniors and our Friends Over 55 should have thought through who they should have firmed up who they would like to have as their POA during the process of setting up their WILL.​

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Ontario recognizes two main types of POAs under the Substitute Decisions Act, 1992:

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In Ontario, the Substitute Decisions Act, 1992 defines two primary types of Powers of Attorney (POAs) designed to allow an individual (the "grantor") to appoint someone (an "attorney") to make decisions on their behalf if they become incapable: a Continuing Power of Attorney for Property covers financial and asset management, which remains valid even if the grantor loses mental capacity, and a Power of Attorney for Personal Care addresses decisions related to health care, housing, nutrition, hygiene, and safety, which only becomes effective upon the grantor's incapacity to make those personal care choices themselves.

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• Continuing Power of Attorney for Property (CPOA for Property):

  • Purpose:

    • Grants your Attorney the authority to manage your financial affairs and property. This includes banking, investing, paying bills, selling real estate, and handling taxes.

  • "Continuing" Aspect:

    • This is key. It means the POA remains valid even if you become mentally incapable. This is the most crucial type of POA for financial planning and incapacity planning.

  • When it Takes Effect:

    • You can specify if it takes effect immediately upon signing (for convenience) or only upon a determination of your mental incapacity. For incapacity planning, it's generally best to have it take effect immediately.

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• Power of Attorney for Personal Care (POAPC):

  • Purpose:

    • Grants your Attorney the authority to make decisions about your personal care, such as healthcare, medical treatment, housing, nutrition, clothing, and safety.

  • When it Takes Effect:

    • This type of POA only takes effect if and when you are determined to be mentally incapable of making those decisions yourself.

  • "Living Will" / Advance Directive:

    • While Ontario doesn't have a formal "living will" document, you can include your wishes and instructions regarding specific medical treatments and end-of-life care within your Power of Attorney for Personal Care. Your Attorney is legally required to follow these instructions unless they are impossible to carry out.

 

Key Aspects of POAs in Ontario:

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• Age to Grant:

  • You must be at least 18 years old to grant a Continuing Power of Attorney for Property and at least 16 years old to grant a Power of Attorney for Personal Care. You must also be mentally capable at the time of signing.

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• Witnesses:

  • Both types of POAs in Ontario require two witnesses (not the Attorney, their spouse, or a minor). Virtual witnessing is also permitted, with a licensed Ontario lawyer or paralegal as one of the witnesses.

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• Duties of an Attorney:

  • Your Attorney must act honestly, in good faith, and in your best interests. They are accountable for their actions and must keep detailed records of all financial transactions. They generally cannot transfer your money or property to themselves unless explicitly authorized and it is in your best interest.

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• Importance:

  • Without a valid POA, if you become mentally incapacitated, your loved ones may have to apply to the court to be appointed as your guardian or statutory guardian, a process known as a "guardianship application." This is a public, costly, and time-consuming legal proceeding.

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How They Work Together

in Ontario (Will, Executor, POA)

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Wills, Estate Trustees (Executor), and Powers of Attorney form a cohesive estate plan:

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• During Your Lifetime (and Incapacity):

  • Your Powers of Attorney are active. If you become mentally incapable, your appointed Attorney(s) make decisions about your finances (Continuing POA for Property) and personal care (POA for Personal Care). These documents ensure your affairs are managed by someone you trust, avoiding court intervention.

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• Upon Your Death:

  • Your Powers of Attorney immediately cease to be valid. At this point, your Will becomes the governing document. The Estate Trustee named in your Will then takes over to gather your assets, pay your debts and taxes, and distribute the remaining estate according to your specific instructions in the Will.

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In summary, having all three documents properly drafted by an Ontario estate lawyer is essential for a comprehensive estate plan that covers both potential incapacity during your lifetime and the orderly distribution of your estate after your death. Seniors and our Friends Over 55 should either have all these things set up properly or in the process of taking care of these important estate planning matters.​

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To discuss further or for questions of clarification please contact Mark Albert, CEA, EPC at either: 416-659-6655 or 

markalbertpfs@gmail.com.

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