News & Views

Multiple Wills – A Sigh of Relief
January 30, 2019

Multiple Wills – A Sigh of Relief

A recent Court decision created uncertainty in the estates bar

Written by Craig Sandler

A recent decision of the Ontario Superior Court of Justice in Milne Estate (Re), 2018 ONSC 4174 caused consternation in the estates bar. At issue was the practice, which has been extensively used in Ontario, of preparing multiple wills in order to reduce Estate Administration Tax payable by an estate. The idea behind multiple wills is to divide the assets of the estate into those assets requiring probate for their administration, and those assets which do not require probate for their administration, such as shares in privately held corporations. The assets requiring probate are placed into a Primary Will and Estate Administration Tax is payable on the value of those assets. The assets not requiring probate are placed into a Secondary Will, which is not submitted for probate and on which no Estate Administration Tax is payable.

It goes without saying that the more assets that can be placed into the Secondary Will, the lower the Estate Administration Tax payable, and the greater the benefit to the estate. In order to allocate as many assets as possible to the Secondary Will, a basket clause has been widely used allowing the estate trustee the ability to determine which assets fall into the Primary Will and which assets fall into the Secondary Will. 

The Milne decision impacted this general practice by holding that a will is a form of trust, and as such, requires the “three certainties” of trusts, one of which is certainty of subject matter. Milne held that the basket clause allowing the estate trustee to determine whether an asset falls into a Primary Will or a Secondary Will violates the certainty of subject matter at the date of death. Accordingly, in Milne, the Primary Will was held to be invalid.  

It is important to note that the Milne decision did not invalidate the concept of multiple wills, it was the specific language in the wills being reviewed by the Court that the Court found objectionable.   

To add further flux to the issue, a subsequent decision of the Ontario Superior Court of Justice in Panda Estate (Re), 2018 ONSC 6374 not only declined to follow the Milne decision, but directly contradicted it. An in depth discussion of the Panda decision’s analysis of Milne and its findings contradictory to Milne are beyond the scope of this article, however it is interesting to note that the Panda decision stated that a will is not a trust and is not required to satisfy the three certainties to be valid.   

This resulted in two conflicting decisions from the same level of Court. It was widely believed that the Milne decision would be appealed, and hoped that it would be overturned. Pending that appeal, clients and estates counsel were left with a choice of waiting for the appeal to be heard and taking the risk during that time that if challenged, their wills could be viewed according to either the Milne or the Panda approaches, or revising their wills, which could prove to be unnecessary if an appeal is successful.

It is with relief that this issue now appears to have been settled. The Divisional Court of the Ontario Superior Court of Justice (2019 ONSC 579) expedited the hearing of an appeal of the Milne decision and decided that a will is not a trust and therefore not subject to the three certainties. The Divisional Court further found that the basket clause does not result in a lack of certainty of subject matter as there is an objective basis to determine which assets fall into which will, namely whether a grant of authority by a court is required for transfer of the property. As such, multiple wills continues to be a valid vehicle for estate planning and reducing Estate Administration Tax. 

The uncertainty and consternation created by the Milne decision now appears to be put to rest, and estates lawyers are breathing a sigh of relief.   

For more information on the matter, please contact Craig Sandler directly at [email protected] or at 905 763 3770 x 214.

*The material provided in this article is for general information purposes only. It is not intended to provide legal advice or opinions of any kind.


About the Author:

Craig Sandler is a seasoned advisor to business in all areas of corporate and commercial law. Acting for large corporations, mid-sized firms and small start-ups alike, he offers informed, practical advice on asset sales and acquisitions, commercial agreements, leasing arrangements and everyday business issues.

Do I Owe HST On My Assignment Sale?
January 09, 2019

Do I Owe HST On My Assignment Sale?

Written by David Meirovici

For some, purchasing a pre-construction condominium or freehold home can be viewed as a great low-cost opportunity, but if your intentions of living in that property are not clear from the beginning, you could wind up paying HST on something you never even owned.

Under the current GST/HST guidelines, the Canada Revenue Agency provides that “the sale of an interest in a new house is generally taxable where the person selling the interest is a builder of the house”. To understand whether this applies to you, we must understand what it means to “sell an interest” in a house and the definition of a “builder”. The answer to both may surprise you.

Did I Sell an Interest in the Home?

Generally speaking, all assignments are a sale of an interest in a home. The simple act of signing an agreement to purchase a newly constructed home or condominium is in of itself an acquisition of an interest in that home. As a result, the moment an individual or corporation then assigns that agreement to someone else (before final closing of the property), they have effectively sold that interest in the property. 

Am I a “Builder” subject to HST?

Under the GST/HST guidelines, the term “builder” is not restricted to someone who physically constructs a home. Instead, a Builder includes any person or corporation who acquires a home, before it has been occupied, for the “primary purpose” of selling or leasing that property. In turn, determining whether an assignor will owe HST depends entirely on that person/corporation’s intention at the time of purchasing the property.

If it can be shown that the assignor’s primary intention in buying the property was to either sell or lease it once complete, then HST will be payable on both 1.) the Gross Profit made under the assignment transaction and, 2.) such portion of the assignment price related to the return of those deposits originally paid by the assignor to the developer. If, however, the Assignor can show that the property was always meant as a primary place of residence, they would not meet the definition of a “builder” and subsequently no HST would be payable. This is the case where despite a person’s intentions to live in the property, a reasonable change in circumstances (divorce, change of financial wellbeing), have caused the decision to assign.

What does the CRA Look at in Determining Intention?

In making this determination of Intention, a few of the items that the CRA will look at include:

1. Did the assignor list their interest while the property was still under preliminary construction?
2. Did the assignor’s family situation not match the unit/home that was purchased (i.e. is the property a 1-bedroom condominium for a family of 4)?
3. Did the assignor arrange preliminary financing terms beyond their financial means, or on a short-term basis?
4. Does the assignor’s pattern of conduct suggest that their occupancy of the property would not be permanent (i.e. did the purchaser make several property purchases at the same time).

While none of the above are determinative, the onus is on the assignor to provide sufficient documentation to counteract a CRA assessment that HST is payable. Because of this, those buyers hoping to quickly assign their new build condominiums for a profit, must understand that not only is HST payable on that assignment where the property was always meant as an investment, but that even if it wasn’t, the original intention to occupy is well documented and supported.

For more information on this, contact David Meirovici directly at [email protected] or at 905 763 3770 x222.

*The material provided in this article is for general information purposes only. It is not intended to provide legal advice or opinions of any kind.

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About the Author:

David Meirovici practices primarily in the areas of commercial and residential real estate, acting on behalf of individuals, corporations and financial institutions. In addition, David is a member of our corporate law group, providing support on commercial transactions as well as advising on will and estate matters.