Mirror Wills vs. Mutual Wills
Spouses who intend to make their wills together should be attentive to the differences between mirror wills and mutual wills. Both of these types of wills are generally produced by spouses who seek to pass down their estate in an identical manner. However, despite having a shared goal, there are crucial differences that spouses (or two parties) should keep in mind when creating their will. Mirror wills simply mean that two parties created individual wills that have reciprocal terms. A mutual will is a mirror will that goes one step further by including a clause that the surviving party cannot revoke or change the terms of a will after the death of the other party. In most circumstances, a court will only find a mutual will to exist when it has been explicitly stated in writing. Edell v. Sitzer, (2001) 55 OR (3d) 198 (Ont SCJ), a leading Ontario case, established that a mutual will must: 1. satisfy the requirements for a binding contract and not be just some loose understanding or sense of moral obligation; 2. be proven by clear and satisfactory evidence; and 3. include an agreement not to revoke the Wills. Therefore, absent a written clause, the court is hesitant to assert that a will is mutual. In recent years, however, there has been a push in case law that has challenged the requirement that a mutual will is explicitly such. In Rammage v. Estate of Roussel (ONSC 2016), the issue at hand was that there was no written agreement that the wills of the spouses were mutual, but the court found that there was a verbal agreement between the spouses while they were both alive that their wills would be mutual (specifically that their estates would be equally divided among their respective children). The court found, based on corroborating evidence, that the verbal agreement between the two for their wills to be mutual was sufficient to satisfy the requirements of a binding contract. Furthermore, neither spouse had objected to each other’s wills while they were still both alive. Based on this, the court established that their wills had been mutual. This case was contentious, generating a lot of discussion among legal professionals, because it pushed back against the requirement that a mutual will must be explicitly such and gave a degree of credence to verbal contracts (albeit based on strong evidence). That being said, individuals should still be cautious as courts will still hesitate, especially when there is a lack of evidence, to make such assertions. For this reason, couples should do their best to be as clear as possible when drafting their wills, especially if they have had children outside of their marriage or common-law relationship. Mutual wills guarantee that a surviving spouse cannot redirect the inheritance of an estate to the sole benefit of their own children at the expense of their step-children. Surviving Spouse’s Claims under the Family Law Act (FLA) When the Family Law Act (FLA) of Ontario was passed in 1986, the administration of estates became more intertwined with family law. Previously, only legal claims under Part V of the Succession […]
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LAND TRANSFER TAX IN ESTATE TRANSFERS
What is Land Transfer Tax (LTT) and Who Pays LTT? Land Transfer Tax (LTT) is a tax payable to the government upon the closing of a transaction for the purchase of either land or an interest in land.[1] Who Pays LTT? In Canada, every province except Alberta and Saskatchewan impose a land transfer tax on those who purchase land.[1] However, some municipalities such as Toronto impose a Municipal Land Transfer Tax (MLTT) in addition to the provincial land transfer tax.[2] While land transfer tax is to be paid anytime an individual purchases land, there are certain circumstances in which an individual does not need to pay land transfer tax. These include transfers that occur between: spouses; an individual to a family corporation; between family members when the transferred property is farm land; and charities.[3] Additionally, individuals can receive a rebate on the amount paid in land transfer taxes if the individual is a first-time homebuyer.[4] This rebate is open to first-time homebuyers in Ontario, British Columbia, Prince Edward Island and the City of Toronto.[5] The eligibility criteria for receiving a rebate on land transfer tax is specific to each province offering the rebate. How is LTT Calculated? Typically, land transfer tax is calculated as a percentage of the amount paid for the land being acquired. The calculation of tax also accounts for any amount remaining on a mortgage or debt that has been assumed on the land.[6] According to subsection 2(1) of the Ontario Land Transfer Tax Act, the rates of land transfer tax in the province are as follows: .5% of the value for up to and including $55,000; 1% of the value exceeding $55,000 up to and including $250,000; 5% of the value exceeding $250,000 up to and including $400,000; 2% of the value exceeding $400,000; and 5% of the value exceeding $2,000,000 when the land contains one or two single family residences.[7] LTT in Estate Transfers With a Will If a sole property owner dies with a Will, the land transfers to the named beneficiary or beneficiaries stipulated in the Will. Where there is only one beneficiary, the land transfer tax is not payable.[8] This type of situation is not taxable because the transfer itself occurs by operation of a legal instrument; otherwise known as the will.[9] Land transfer tax statements should clarify that the transfer is going solely to one beneficiary.[10] Without a Will When a property owner has not made a Will and subsequently dies, the Succession Law Reform Act governs which individual(s) are entitled to the property.[11] Where there is only one beneficiary, the land transfer tax is not payable because there is no value for consideration of the transferred property.[12] If there is more than one beneficiary, the land transfer tax is payable.[13] Likely, this is because there has been a consideration for value. For instance, if one of the beneficiaries takes the sole rights to the property and leaves the remaining value of other assets in the estate to the other beneficiary, tax is payable on the value of said assets because consideration has been given to obtain sole rights to the property.[14] […]
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