When Justice Dunphy first released his decision in Re Milne Estate, lawyers, will makers, and financial advisors across Ontario were extremely concerned that the ruling threatened to nullify thousands of wills across the province.
In the wake of the Ontario Court of Appeal overturning Justice Dunphy’s decision, everyone can now breathe a sigh of relief.
In Re Milne Estate, a married couple passed away. Both husband and wife had used the “multiple wills strategy”, and included a “basket clause” in the primary will.
Multiple wills are a well-established and popular estate planning strategy, useful for achieving a number of objectives. The multiple wills operate at the same time, with different assets governed by different wills.
Only the primary will is submitted to the court for probate. This allows assets in the secondary will to be administered immediately, privately, and not to be subject to the estate administration tax. For these reasons, multiple wills are useful to business owners, owners of foreign real estate, or anyone who owns valuable assets which do not require Ontario probate to administer.
Since 1998, when the Granovsky Estate decision first confirmed that multiple wills are a valid estate planning strategy, many lawyers have added further innovations to the multiple wills strategy, such as the so-called “basket clause”.
The “basket clause” gives executors of the will the power to determine if an asset should fall into the primary will or secondary will. The basket clause is useful because typically a person makes their will years before death, and does not know exactly what assets they will own at the time of their death.
In the original Milne decision, Justice Dunphy decided that a will is actually a “trust” created at the time of death. In order for a “trust” to be legally valid, it needed to fulfill the three “certainties of trusts”, which includes certainty as to the property committed to the trust. He further found that it was necessary that the three certainties “must be satisfied at the time the trust is created… it is not enough to say that the assets subject to the trust will be determined later”.
Due to the presence of the basket clause in the will, Justice Dunphy found there was no certainty at the time of death as to what assets fell under the primary will, and as a result, the primary will was invalid and could not therefore be admitted to probate.
The broad implication of this decision was that thousands of wills across Ontario containing a basket clause might be invalid, creating a major problem for anyone who made use of this strategy, and for the beneficiaries of their estates.
The implications of the decision were sufficiently severe that the Toronto Lawyers Association sought and was granted intervenor status to support the appeal.
The Ontario Court of Appeal found that a will is not a trust, but that even if a will is a trust, that the trust is not subject to the three certainties, and even if it were subject to the three certainties, the basket clause does not necessarily make the property subject to the will uncertain because there is an objective basis to ascertain it: whether or not probate is required for transfer or realization of the asset.
Thanks to the decision of the Court of Appeal, the multiple wills strategy and basket clause are still valuable tools for estate planners to help their clients reduce Estate Administration Tax, grant a degree of privacy over part of the estate, and ensure a speedier and more efficient administration of assets governed by the secondary will.
Nonetheless, although the appeals court decision is reassuring, the Milne decision illustrates the importance of periodically reviewing your will with an estate planning professional to ensure that your will still meets your needs and is in compliance with the both the current legislation and current case law.