Back to Navigation

Issues to Consider When Preparing Wills

  • 1. Should You Prepare Two Separate Wills?
    A Planning Lawyer who runs his or her practice of law as a sole proprietorship, or as a professional corporation of which the Planning Lawyer is the sole shareholder, should consider preparing two Wills, one dealing with assets related to his or her law practice (the “Law Practice Estate”) and the other dealing with all other assets (the “General Estate”).

    The purpose of having two Wills is to provide the Replacement Lawyer with full power and authority to operate, sell or wind down the law practice, while simultaneously ensuring that control over personal assets such as a family home and bank and investment accounts remains with the Planning Lawyer’s spouse, family member or whomever else the Planning Lawyer has currently named as his or her executor.
     
  • 2. What Issues Should You Consider when Preparing Two Separate Wills?
    When preparing two Wills, the Planning Lawyer should consider the following issues:
     
    • 2.1 Assets
      Ensure that all assets are dealt with, either under the Law Practice Will or under the General Will, and that there is no overlap that might cause confusion. The sample clauses in the Sample Last Will and Testament Clauses document accomplish this by defining what assets are to form part of the Law Practice Estate, and providing that the General Will covers all assets other than the Law Practice Estate. The sample clauses [1] and [7] also make it clear from the very beginning of each Will which set of assets is being dealt with.
    • 2.2 Revocation
      Ensure that neither Will revokes the other. Clause [2] in the Sample Last Will and Testament Clauses document stipulates that it only revokes prior Wills dealing with one particular group of assets (Law Practice Estate or General Estate). This means that even if a Codicil is later prepared to one of the Wills, thus republishing the revocation clause, it will not affect the other Will.
    • 2.3 Life Insurance Policy
      If the Planning Lawyer has secured a separate life insurance policy to fund the ongoing expenses of the Law Practice (including compensation due to the Replacement Lawyer), consider designating the Replacement Lawyer as the beneficiary, in trust to use the proceeds as part of the Law Practice Estate. If the Planning Lawyer also has other life insurance, take care that any life insurance beneficiary declaration in the General Will excludes the policy that is being dealt with under the Law Practice Will. If the Planning Lawyer only has one policy to cover both professional and personal obligations, consider dealing with it in the Law Practice Will with possibly a direction to pay a portion of the proceeds immediately to the Trustee of the General Will. For sample language, review Clause [3] of the Sample Last Will and Testament Clauses document.
    • 2.4 Replacement Lawyer Selection
      When selecting a Replacement Lawyer to act as executor for the Law Practice Will, take into account:
       
      • The proposed Replacement Lawyer’s age and health. It is advisable to name someone who is likely to be available not only when the Planning Lawyer dies but also for as long as it takes to sell or wind up the law practice.
       
      • The nature and location of the proposed Replacement Lawyer’s own law practice. A Replacement Lawyer with a well-established, well-run practice and reliable staff may be better able to take the time necessary to manage the Planning Lawyer’s law practice. A Replacement Lawyer whose office is in the same town or the same part of the city as that of the Planning Lawyer may find it easier to go back and forth as required to attend to matters in both offices.
       
      • The impartiality of the proposed Replacement Lawyer. If the proposed Replacement Lawyer has a conflict of interest with another role (e.g. a landlord, tenant or creditor of the Planning Lawyer, or a potential purchaser of the Planning Lawyer’s law practice), consider whether the conflict can be adequately dealt with by requiring that certain decisions (such as the sale price and terms of the Planning Lawyer’s law practice) be determined by agreement between the Replacement Lawyer and the executor of the Planning Lawyer’s General Will.

      For sample language appointing an estate trustee under both the General Will and Law Practice Will, see Clause [4] of the Sample Last Will and Testament Clauses document.
    • 2.5 Consent of Executor(s)
    • 2.6 Planning Lawyer’s Executorships or Trusteeships
      Satisfy yourself that the executorship or trusteeship of any estate or trust of which the Planning Lawyer is the last surviving executor or trustee (with no alternate executorship or trusteeship appointment in the governing Will or trust document) will devolve appropriately. Under the Trustee Act, unless a Will or trust document provides otherwise, the last surviving executor or trustee of an estate or trust is entitled to appoint a successor by Will. If there is no such appointment, then it is the personal representatives of the last surviving executor or trustee who can act as successor executor or trustee or appoint another person or other persons to fill this role. Even if it is not part of the Planning Lawyer’s practice to take on executorships or trusteeships for clients, it is possible that the Planning Lawyer may be acting as executor and trustee for the estate of his or her own spouse or parent at the time of the Planning Lawyer’s death. Sample Clause [5] in the Sample Last Will and Testament Clauses document emphasizes the distinction between personal matters and professional matters by naming the Replacement Lawyer to administer estates and trusts of which the Planning Lawyer is named executor or trustee by virtue of his or her office, and the Planning Lawyer’s personal Trustee (who may be a family member or other person with knowledge of or an interest in the family) to administer estates and trusts of which the Planning Lawyer is named executor or trustee by virtue of his or her personal relationship to the deceased, settlor or beneficiary.
    • 2.7 Compensation
      If appropriate, negotiate ahead of time the rate of compensation to be paid to the Replacement Lawyer and, if desired, set it out in an agreement between the Planning Lawyer and the Replacement Lawyer. Due to the nature of the work and the assets, it would not normally be appropriate to allow compensation to be claimed as a percentage of receipts and disbursements, as in a personal situation. See Clause [6] of the Sample Last Will and Testament Clauses document for sample language authorizing payment to the Replacement Lawyer for administering the law practice estate. For sample language appointing an estate trustee under both the General Will and Law Practice Will, see Clause [4] of the Sample Last Will and Testament Clauses document.
    • 2.8 Corporate Interests
      If the Planning Lawyer runs his or her law practice through a professional corporation, or owns shares or debt in a management company that runs the practice, or in a corporation that owns real property leased by the law practice, the shares and debt in the corporation would normally be included in and administered as part of the Law Practice Estate. Sample Clause [7] in the Sample Last Will and Testament Clauses document contains extra provisions to deal with interests in corporations, specifically the wording in square brackets in paragraph [7] (a) and the whole of paragraph [7] (b).
    • 2.9 Debts and Other Expenses
      Allocate debts, taxes and other expenses appropriately between the Law Practice Estate and the General Estate. Sample Clause [9] in the Sample Last Will and Testament Clauses document requires the Trustees of the Law Practice Will to pay all debts and taxes related to the Law Practice out of the Law Practice Estate, and the Trustees of the General Estate to pay all other debts, taxes, funeral and testamentary expenses. There is also discretion to pay debts and taxes related to one set of assets out of the other. More care may need to be taken in allocating debts and taxes to the correct pool of assets if the beneficiaries of the two Wills are different.
    • 2.10 Bequests
      If there are to be any specific bequests, take care that they appear in whichever Will governs the particular asset which is the subject of the bequest.
    • 2.11 Legacy
      Where a legacy is to be paid, satisfy yourself that there will be sufficient funds in the Will that contains the legacy to pay it in full. Alternatively, the Planning Lawyer may wish to include the legacy in both Wills but, to avoid doubling up, may stipulate that the sum payable under the Law Practice Will is to be reduced by the sum, if any, paid under the General Will (or vice versa).
    • 2.12 Residue
      Include a residue clause in each Will to avoid any intestacy. In most cases (although this is not necessary), the residue clauses in the two Wills will be identical, so that income from and proceeds of sale of the Law Practice Estate can be distributed to the same beneficiaries of the Planning Lawyer, in the same proportions, and on the same terms and conditions as the Planning Lawyer’s other assets.
    • 2.13 Ongoing Trusts
      The Replacement Lawyer may not want to be involved in the long term administration of a trust for a spouse, minor child, or other beneficiary of the Planning Lawyer. Therefore, if there are to be ongoing trusts, consider authorizing or directing the Replacement Lawyer to pay or transfer the funds to the executors and trustees of the General Will, or to another trustee, as and when they become available (generally upon the sale or winding up of the law practice).
    • 2.14 Purchase by Trustee
      If there is any chance of the Replacement Lawyer wanting to buy the Planning Lawyer’s law practice, consider authorizing such a purchase in the Will. Without a power to purchase assets from the estate, the purchase would require the approval of either the court or of all the beneficiaries (if there are no minor, unborn, unascertained or mentally incapable beneficiaries). Instead, sample Clause [10] in the Sample Last Will and Testament Clauses document allows the estate trustee of the Planning Lawyer's General Estate (most often a family member or trusted friend) to negotiate and approve the price and terms of a possible sale of the Law Practice to the Replacement Lawyer. The easy availability of such an independent review is a strong argument for having two separate Wills and for naming a different person from the Replacement Lawyer to act as estate trustee for the General Estate. Note that the precedent clause is an administrative power only. If the Planning Lawyer wishes to give a first option to the Replacement Lawyer to purchase the practice, or set out a formula for determining price or other terms and conditions of sale, this should be done in the main body of the Law Practice Will or in a separate agreement.
Created on: October 2014
Terms or Concepts Explained