can demand the security of the court
order which confirms the authority of
the estate trustees. In Ontario, a common method of avoiding unnecessary
probate tax is the utilization of multiple Wills. This technique is based
upon the preparation of two Wills for
a single testator: the primary Will for
those assets where probate will most
certainly be required, and the secondary Will for those assets not requiring
probate for their transfer. Depending
on how the testator controls the corporation, and on the basis of a friendly
board of directors, shares can be transferred without a court order, saving
approximately 1.5% tax on the value of
the shares. An additional benefit of multiple Will planning is privacy. Whereas
Wills that go through court are a public
document, the secondary Will, dealing
with those assets that do not require
probate, remains private.
Estate Trustee
Choosing the right person to be
business owner’s estate trustee will be
crucial to the successful administration
of the estate. Generally speaking, the
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estate trustee should have the necessary business knowledge to be able to
deal with the business assets effectively.
If the business is incorporated, the
estate trustee will step into the shoes of
the deceased owner to elect the directors who will run the corporation after
the death of the business owner. If the
business is specialized, and raises and
sells beef cattle, it is important that the
estate trustee has the necessary specialized knowledge. Although many individuals choose to name family members as estate trustees, it could be that
a trust company would be the better
choice. Trust companies’ entire focus is
the administration of estates and trusts
and they have the necessary in-house
experience to manage complex business assets.
Conclusion
If you are a small business owner and
you intend to transfer the business to
your beneficiaries you should consider
whether your current business format
and estate planning will facilitate your
intentions. You may want to incorporate, if you are incorporated you may
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want to reorganize to minimize tax consequences, you may want to prepare
a secondary Will or even reconsider
the qualifications and skill set of your
estate trustee. Some of these changes
may take some time to facilitate and
may require the advice of both your
accounting and legal advisors. Our
advice would be to start the process
early before disability or death maybe
it difficult or impossible to complete.
Upon completion you will find comfort
in knowing that your beneficiaries have
been properly provided for. n
Michael Mumby is a corporate/commercial
associate whose practice includes incorporation, professional corporations, corporate
restructurings, shareholder agreements, mergers and acquisitions, leases and other commercial contracts, as well as institutional
financing. Michael represents individuals,
small businesses and private corporations.
Cate Grainger is an estates lawyer in the
Wills, Estates, Trusts and Charities Group of
Harrison Pensa LLP. Her practice focuses on
estate planning, estate administration, corporate succession strategies and not-for-profit
law.