There is a tax planning strategy often used to reduce the amount of estate administrative tax. The Executor must acquire a Certificate of Appointment of an Estate Trustee with a Will (“Certificate of Appointment”) before they can deal with the estate’s assets.
Multiple Wills are used to divide the estate into “good assets” and “bad assets”. The “good” assets include personal property and shares in a private company and these assets are all covered under one Will. The “bad” assets include real property and certain investments accounts. These are included in a separate Will and are those for which a Certificate of Appointment is necessary. So, the estate administration tax is payable only under the Will covered by the Certificate of Appointment, or the “bad assets”.
With that Certificate of Appointment, estate administration tax is payable at the rate of 0.5 per cent on the first $50,000 of the value of the estate; and 1.5 per cent on the value of estate in excess of $50,000. This amounts to $7,000 in the case of an estate valued at $500,000 and to $22,000 in the case of an estate valued at $1.5 million.
When considering the use of multiple Wills, you need to consider the costs of additional legal fees to the estate, plus additional administrative fees during the processing of the estate. Be sure to get professional advice and put pencil to paper to see if this strategy is really beneficial in your circumstances. Also realize that if multiple Wills are not written properly, there can be serious consequences not originally intended. Sometimes a portion of the property can be deemed intestate.