How to Use a Corporate Will to Save Money on Probate Fees

DISCLAIMER

This information is intended for business owners in Canada and serves as general guidance only. Always consult with a qualified advisor before making any legal decision. 

In this article, we’ll cover the following topics:

• What the benefit is of a corporate will (also known as a ‘secondary’ or ‘restricted’ will)

Why you may need a corporate will

Most Canadians don’t have a single will, let alone multiple wills to cover their various assets.So, why might you need a corporate will? The answer is simple: reduced probate fees.

Corporate wills deal with the certain types of corporate property that you hold (e.g. privately held shares). Typically, before assets in your estate can be disbursed, the will needs to go through probate – an approval process that takes time and costs money, specifically roughly 1.4 percent of the value of the assets being probated. At face value, this might not seem like a lot of money, but it can become quite expensive, especially for large estates. However, eligible corporate property, if properly managed through a corporate will, doesn’t need to go through probate. 

Now let’s assume you also have some shares in a privately held company. By establishing a corporate will for those shares, you can bypass the probate process with respect to that aspect of your estate. Depending on the value of your shares, you might be able to save your estate a significant sum of money, and pass a greater portion of your legacy onto the next generation.

If the shares in your company are worth $10m, then your estate will save $140,000 in probate fees.

Furthermore by keeping your corporate estate distinct from your general estate, the assets under your corporate will can be passed down to the next generation faster than if they were going to be governed by the general estate. This can be helpful when management continuity is important, as is often the case for active businesses.

Keep in mind that you will need to have different executors for your general and corporate wills. This can increase the complexity of the management of your estate upon your passing. You should discuss with your tax advisor to validate whether this is an appropriate estate planning solution for you.

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