Corporate Wills in B.C.: Could a Second Will Simplify Your Estate?

If you own a private company, your shares may be one of the most valuable assets you’ll eventually leave behind. But that doesn’t necessarily mean they need to be handled in the same way as your home, investments, and other personal assets when you die.

For some B.C. business owners, having a second will specifically for their private-company interests can make administering their estate simpler and potentially reduce probate fees. Often called a corporate will, this can be a useful estate-planning tool, particularly as you begin thinking about retirement, succession, and what will eventually happen to your business.

What is a corporate will?

Despite the name, a corporate will isn’t a will made by your corporation. It’s a second personal will that deals with your private company shares and other qualifying corporate assets.

A corporate will generally requires a different executor than the executor for the personal will. This helps create separation between personal and corporate assets. Generally, a spouse or a close family friend is the executor of the personal will while a trusted advisor, business partner, or a child working in the company is chosen as the executor of the corporate will.  

Your primary will generally deals with personal assets and other property that requires probate. Since your private company shares generally do not need to pass through probate, keeping them in a separate will can save probate fees.

The two wills have to be carefully drafted so they work together and clearly identify which assets each one covers.

Why would a business owner consider a corporate will?

One of the biggest reasons is that there are no probate fees for qualifying assets in a corporate will.

Probate is the legal process through which the B.C. Supreme Court confirms that a will is valid and gives the executor authority to administer the estate. Not every asset necessarily requires probate, but when probate is required, fees are based on the value of the estate covered by the grant.

In B.C., there is no probate fee on the first $25,000 of an estate. Fees are $6 per $1,000 on the portion between $25,000 and $50,000 and $14 per $1,000 on the portion above $50,000. For larger estates, that means the marginal probate fee is effectively 1.4%.

That can become significant when private-company shares have grown substantially in value.

For example, suppose you own shares in your company worth $2 million. If those shares would otherwise form part of the estate being probated, they could add approximately $28,000 to the probate fees payable. If the shares can instead be administered through a separate corporate will that doesn’t require probate, that cost may be avoided.

The larger the value of the business interest, the more meaningful those potential savings can become.

Are there other benefits?

Separating corporate interests from the rest of your estate can help your executor deal with the business independently from assets that have to proceed through probate. That may be helpful when ownership or management decisions need to be made relatively quickly after the owner’s death.

There can also be a privacy benefit. When a will is probated, information about the estate is filed with the court and becomes part of the public court record. Assets governed by a corporate will that doesn’t need to be probated , which can help keep information about private-company interests and their value out of the public probate record.

What should you consider before creating a corporate will?

Having a corporate will allows the private company to continue operating after the death of the shareholder since there is no need to probate, which often takes 6 months to year. This allows the executor to deal with the shares as soon as possible so the company can sign contracts, administer payables, etc., so there is no stoppage in the business activities.

However, there are also additional estate considerations when using multiple wills. They need to be carefully coordinated so that one doesn’t accidentally revoke or conflict with the other. Depending on your age, family circumstances, and estate-planning goals, other approaches, including alter ego or joint partner trusts, may also be worth considering.

These considerations are why a multiple-will strategy should be developed with professional legal advice rather than simply adding another will to an existing estate plan.

Does a corporate will reduce tax when you die?

The short answer: No.

A corporate will is primarily a way to manage probate and estate administration. It doesn’t, on its own, eliminate the income tax consequences associated with your private-company shares.

Generally, when someone dies, they’re considered to have disposed of their capital property immediately before death. That can result in a capital gain on private-company shares, although certain transfers, including qualifying transfers to a spouse or common-law partner, may allow tax to be deferred.

For a business owner, this potential tax bill can be considerably more significant than the probate fees themselves. That’s why decisions about your will should be coordinated with the broader tax and succession planning for your company.

Is it time to review your estate plan?

If you prepared your will years ago and your company has since become a significant part of your wealth, it may be worth revisiting how your business interests are treated. A corporate will can potentially reduce probate costs, increase privacy, and help separate the administration of your business from the rest of your estate. Whether it’s the right approach, however, depends on your company, your family, and what you ultimately want to happen to the business.

As you approach retirement, your estate plan should also work alongside your broader succession plan. That can mean considering what your business is worth, who will eventually own it, how the transition will be structured, and what tax obligations could arise along the way.

Your DMCL advisor can work with you and your legal advisors to assess the tax, valuation, corporate, and succession-planning considerations involved and help ensure the different pieces of your plan work together.