Michigan wants one will, and Canada accepts more than one. What can Michigan estate planning learn from Canada?
By Tom Oriet - Of-Counsel
Americans can have multiple Wills that deal with assets in more than one country. Having one Will made for each country ensures that the local law where the property is located governs the disposition of the deceased’s property, excluding U.S. taxation. In Ontario, Canada, some testators have more than one last Will and testament concerning assets within Ontario, and they serve as a lawful tax avoidance strategy. For instance, Ontario has the Estate Administrative Tax of roughly 1.5% of the value of all probated assets belonging to the deceased at their death. Many people believe Canadians die without paying taxes on their estates. Instead of an outright estate tax, Canada federally taxes all capital property, including depreciable property, the taxpayer owned before her death. In translation, the government will tax a Canadian decedent as if she sold everything she owned to realize a capital gain, even though the taxpayer received no proceeds from the deemed sale of their property. There are ways to mitigate the hefty tax burden, such as the personal representative claiming a principal residence exemption when applicable. This capital gain deemed realization is separate from the Estate Administrative Tax, which is avoidable by executing multiple Wills.
Returning the discussion to multiple Wills, an Ontarian with two Wills has one Will for assets requiring probate and one Will for assets that do not require probate. The probated assets are subject to the Estate Administrative Tax, and the personal representative may be given the power under both wills to allocate assets between the probated Will and non-probate Will. Thus, if a client’s estate plan is professionally planned with an attorney, almost no assets are subject to probate, or the exemption amount excludes the estate from Estate Administrative Taxation.
More than one Will could be probated in Michigan, assuming both Wills do not revoke each other and include a date of when each Will became effective. Conversely, Canadians make the second Will with the intention not to probate that second Will, similar to a life insurance contract designating certain people to receive moneys without probate. Personal representatives of the second Will are theoretically treated as holding the property in trust, which is a different legal instrument from a Will. However, a personal representative of a Will is not granted all the same powers as a trustee of a Trust and a basic Will does satisfy all the legal prerequisites in creating a trust. Taking property held in trust under a will is different from property held in trust through an actual trust instrument or a Will containing a testamentary trust. For Michiganders, a person can only have one Will even though that Will comprises of more than one document describing where to devise the assets at death. Thus, all documents constitute one will, and hopefully, the documents do not contradict each other: e.g., having multiple codicils.
If there is a contradiction, having an attorney review the estate plan and revoke all prior wills and codicils may be necessary. Otherwise, a court may decide how your documents are interpreted and probate will be required in Michigan for assets that do not have a beneficiary or a true co-owner that would inherit with survivorship rights. This may sound fine if your estate has the money for the court costs, but when children are disputing some property in two conflicting wills, each child will want the court to interpret the two documents differently, particularly in their favor to receive more property from the estate.
American estate planning should consider a trust instead of two wills concerning assets in the same jurisdiction. This avoids future issues altogether, such as probating certain assets under both Wills. Nonetheless, the Canadians have a brilliant idea for mitigating exposure to probate as estate planning evolves. Why not have a second will to pass assets without a trust and without the probate court? Life insurance and retirement accounts have designated beneficiaries and avoid probate due to the contractual transfer of assets. Following the Canadian approach, why can’t a second Will be treated as a contract to designate and transfer certain non-probate assets to people outside of probate and without imposing all the duties and prerequisites of establishing a trust? These are lofty ambitions to achieve legal efficiency when administering Michigan estates, but Michigan law hasn’t caught up to this approach and Michiganders are better off not experimenting and getting a trust for the time being.
 IRC 2031 (taxation applies to the entire gross estate; however, a tax treaty may provide a tax credit for foreign estate taxes paid).  Granovsky v Ontario,  OJ No 508, 156 DLR (4th) 557.  Estate Administration Tax Act, 1998, SO 1998, c 34, Sch, ss 1(1), 2(6.1).  Income Tax Act, RSC 1985, c 1 (5th Supp), s 70(5)  Income Tax Act, RSC 1985, c 1 (5th Supp), s 40(2)  See Re Panda Estate,  O.J. No. 6075, 2018 ONSC 6734; Re Milne Estate,  O.J. No. 329, 2019 ONSC 579.  MCL 700.3410. No appellate precedent has been established on this section.  See e.g. Trustee Act, R.S.O. 1990, c. T.23, ss. 2–4; Milne Estate v Toronto Lawyers Assn,  OJ No 329, 2019 ONSC 579 at paras 32–44.