Saving Probate on Private Corporations - a Change in BC Law
When I was a busy 24/7 veterinarian, I wanted a financial advisor who was looking out for me and my best interest by offering unbiased advice on investment, insurance and financial planning. With that in mind, I have written this article on saving probate costs. It may be of significant use to you and your corporation. Please let me know if I can be of further assistance.
WESA - The Wills, Estate and Succession Act of BC
The changes in the new Wills, Estates and Succession Act of 2014 contains some good news for BC businesses structured as private corporations. The new Act allows you to use a multiple will strategy to eliminate probate costs on the transfer of private corporation shares to beneficiaries.
Example: Farmer Robert, with his wife Helen, owns an incorporated farm worth $10 million. He also has personal non registered assets of 1 million and a house worth 1 million when he passes away. Generally, the house and the personal assets would be owned jointly with Helen and so would pass without probate to her. But, for example purposes, assume they are in his name. Bob’s farm shares would still have to be transferred to her or, if she has already passed, to someone else.
the old Act, he would have all his assets, including the corporation, listed in the probate application and he would pay $14,000 per million in probate (1.4%). That works out to be $168,000 in estate shrinkage due to probate costs. When Helen passes, another $168,000 disappears when her will is probated and the farm is caught again in the estate process.
Under the new Act (called WESA for short), a separate complimentary will (called the non probate will) would cover the farm corporation shares and prevent the double probate cost. This removes the listing requirement of the farm shares in the probate application along with the house and the 1 million of assets. As a result, the probate cost shrinks to $28,000 from $168,000.
Here are a few more points to consider:
You need to have different executors for the two wills.
Be sure that the 2 wills coordinate with each other. They must be clear on which assets-farm or private they cover and which one is on the hook for any estate debts.
It is pretty clear in the “Bob and Helen example” above that the extra legal cost of the second will is worthwhile. Not always the case though, and you should ask before proceeding if the expected legal bill will be significantly lower than the expected savings on probate. One doesn’t want to pay $2,000 to solve a $1500 problem.
In some businesses, there are non-family directors and the deceased may not have had a controlling interest. The directors could in those cases, insist on probate to transfer the shares to the beneficiaries to protect themselves from future liability.
I would like to point out that this article is intended to alert you to a possible savings on probate fees, not to provide a legal opinion. Only your lawyer can properly guide you in this matter.
Our local lawyers who work in estate law will be able to assist you in establishing this probate saving strategy. Please contact me if you need a referral.