Protecting your Legacy: The Importance of Having a Secondary Will for Business Owners

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TLDR: For Ontario business owners, a Secondary Will covering corporate shares is essential because it legally avoids probate tax on those high-value assets and ensures the seamless, undisrupted transition of business ownership to the next generation.

If you own shares of a Corporation in Ontario, having two wills, a Primary and a Secondary Will, is one of the most effective estate planning strategies you can implement. A standard Primary Will is essential for dealing with personal assets (like your home, bank accounts, and personal belongings), however it often falls short when managing the complexities of your corporate structure. A Secondary Will governs your private company shares and other business interests. 

Having a Secondary Will ensures two objectives: Tax Optimization and Seamless Transition of Ownership.

Primary Objective: Tax Optimization

Effective Tax Planning on an estate level is ensuring a smooth and tax efficient transfer. In Ontario, your estate must pay a Probate Fee (also known as Estate Administration Tax) calculated as a percentage of the total value of all assets passing through the Primary Will.y moving the high-value corporate shares into a Secondary Will—which is not submitted to the court for probate—you can legally and significantly reduce or entirely eliminate the probate tax otherwise payable on the value of those shares. This will allow your estate to avoid paying probate tax (estate administration tax) on the value of your corporate shares which can result in significant tax savings for your loved ones! 

Second Objective: Seamless Transition of Ownership

Our second objective is to protect our corporate shares to ensure a seamless transition of ownership. The Secondary Will dictates who inherits your corporate shares and ensures a seamless transition of ownership and control, minimizing disruption to the business’s operations at a critical time. Beyond tax efficiency, a Secondary Will ensures that your business succession plan is clear and legally enforceable. Without a Secondary Will, your shares may be frozen in the estate administration process, delaying critical decisions and jeopardizing your company’s operations. By clearly directing how your business interests are to be managed, transferred, or sold, you protect both your company’s continuity and your family’s financial security.

In short, a Secondary Will is not just a document; it is a vital tax-saving mechanism that safeguards the value of your business for the next generation,  translates into more capital preserved for your beneficiaries, provides greater flexibility in tax planning, and acts as a proactive way to safeguard your life’s work and provide peace of mind for the next generation.

A well-drafted pair of wills allows your accountant and lawyer to work together to preserve the value of your corporation and to minimize tax. 

EFV Legal is here to support your estate

For more information or to schedule a consultation, contact EFV Legal Professional Corporation. www.efvlegal.ca. Nothing herein is legal advice.