There’s lots of buzz in Ontario about primary and secondary wills
Primary and secondary wills are often used when the testator owns private company shares and probate for the transfer of those shares isn’t required. The private company shares are contained in the secondary will. All of the estate’s other assets are contained in the primary will, which requires the payment of probate fees on the value of those assets. Probate is required to administer those assets through the estate.
Some lawyers have drafted primary and secondary wills using clauses (often referred to as a “basket
clause”) that let the trustee determine which will the assets fall into. This practice has been going on for years but now these clauses have been challenged with the decision in the case of Milne Estate (Re), 2018 ONSC.
In the Milne case, a couple died in October 2017. Each person had a primary and secondary will. The two primary wills were identical to each other and the two secondary wills were identical to each other. The judge accepted the secondary wills because the property in the secondary will had vested in the executors. However, the court took issue with the wording in the primary will where the executor was given complete discretion to determine retroactively whether any assets were vested under the primary will. The executor would determine if an asset was vested under the primary will based on whether probate would be necessary.
The court had to determine if a will that grants the executor the discretion to determine what property is subject to that will is valid. In its review the court said that a trust (an estate is a trust) must satisfy the “three certainties”:
certainty of intent to create a trust,
certainty of the subject matter or property of the trust, and
certainty about the objects of the trust or the purpose.
The court said it was difficult to find certainty of property in this case. What property is the subject of the will must be ascertainable based on the testator’s expressed intent without regard to the executor’s discretion. Milne case did not meet that criteria.
Not all primary and secondary wills are drafted giving the executor discretion to determine the estate’s
assets and these wills may not be affected by the Milne decision.
You might hear from your clients who have primary and secondary wills. The E&O insurer has notified lawyers who practise in the estates area about the Milne case and recommended that these lawyers notify their clients about the potential issue of the validity of the primary and secondary wills.
It’s important to remember that having a beneficiary other than the estate on life insurance and Segregated Fund contracts ensures that those proceeds do not go through the estate and are not subject to probate. That makes using primary and secondary wills unnecessary.
The Milne decision has been appealed, but we’ll have to wait to find out what the outcome of that appeal is.