All About Estates

Managing a Beneficiary’s Share in Real Property with … Shares! Potential Utilities of Nominee Corporations in Estate Planning

Today’s blog was written by guest blogger, Giancarlo Mignardi, Articling Student at Fasken LLP.

For many individuals, their asset of highest monetary value is their real property. For estate planners, this means that often it is important to work with clients to find ways to minimize taxes payable on death in relation to such property. In addition, it may be important to identify ways to have a testator’s real property transferred to a beneficiary with enhanced efficiency and/or even enhanced privacy. In this regard, the transferring of the legal interest in real property to a nominee corporation may be useful. This post provides a brief overview as to why this is so.

Background – Probate Fees 101 and The Use of Multiple Wills

Of preliminary interest is the way in which the payment of the estate administration tax[1] (“EAT” or “probate fees”) is triggered in Ontario. As is well known, where an individual dies testate, probate fees are payable on the cumulative value of the assets included under a probated will. However, by invoking certain probate planning techniques, the common law does not require a testator to include all of her assets in a probated will (i.e. a will that is intended to be filed for probate). Among estate planners, it is common practice to suggest the use of dual or multiple wills in order to lessen testator exposure to probate fees by, essentially, placing assets which require probate under a “primary” will and assets which typically do not require probate under a “secondary” will.

So, which assets do not tend to require probate and thus may be allocated under a secondary will? Shares in private companies! By including such shares in a secondary will, you generally can avoid probate fees payable on the value of such shares. This may result in substantial savings in situations where there is considerable wealth tied to the ownership of such shares (i.e. as probate fees are paid on the value of assets included under a primary will). This is where the central utility of a nominee corporation begins to arise in relation to the legal interest in real property.

The Utility of Nominee Corporations 101

If a testator is able to work with her estate planner to have legal title to, say, her home, transferred to a nominee corporation, the following steps may occur:

Legal and beneficial interests in the home will be bifurcated. The nominee corporation will hold the legal interest as a bare trustee (and is registered on title as the legal owner), while the testator will continue to enjoy the beneficial interest. The testator then concurrently will retain ownership of the shares of the nominee corporation.

The shares of the nominee corporation likely will then be allocated under the testator’s secondary will. For the purposes of will drafting, as the testator’s ownership of her home is through the ownership of shares in a privately held corporation (i.e. the nominee corporation), disposition of the home may be managed similarly to any other shares in privately held corporations. As noted above, such shares do not require probate and therefore can be excluded from the testator’s primary will. Probate fees therefore likely will not apply to the value of the shares in the nominee corporation (and, crucially, the value of the real property).

Under the secondary will, the testator may devise the nominee corporation’s shares to her beneficiaries. This does not transfer legal ownership of the home, as the legal interest continues to remain vested in the nominee corporation. The beneficiaries, though, can enjoy beneficial ownership of the home by means of their ownership of shares in the nominee corporation.

This probate planning technique particularly is useful when it is kept in mind that, if it had been the case that the legal interest in the home had remained vested in the testator, and then in her estate upon death, then the transfer of such legal interest to beneficiaries would have required probate as such court verification most likely is the only way in which Ontario’s Land Titles System would recognize the legal transfer of title. By using a nominee corporation there is no transfer of legal title and the transfer of beneficial ownership is currently beyond the purview of the Land Titles System.

Depending on the circumstances, there may be additional benefits and efficiencies. Consider the following:

Income Tax Considerations. The transfer of the property into the nominee corporation is a “non-recognition event”, meaning that likely no taxes are triggered. Income tax typically would not be triggered on the initial transfer of legal title from the testator to the nominee corporation as bare trustee, because such taxes generally only apply to transfers of beneficial title and not to transfers of legal title alone. As such, taxes are reported only at the time that a deemed disposition occurs in relation to the underlying real property (which only occurs upon the testator’s death, when her beneficial interest is transferred to the beneficiaries).

Privacy Considerations. The use of nominee corporations also may enhance anonymity/privacy. As the nominee corporation holds legal title after the testator’s death, those who end up enjoying beneficial title are not identified in the Land Titles System. Also, because the asset falls under a secondary will (or at times, a tertiary will) that will not be submitted to a court for probate, the particulars of such asset will not enter into the public record (i.e. only probated wills and the associated assets do).

Ongoing Flexibility Considerations. Nominee corporations can provide flexibility regarding changing the beneficial interests held in the corporation. Beneficial owners can be added or removed without having to update the registered legal owners in Ontario’s Land Titles System. However, there likely will be tax implications.

Caveats to Consider

There are some caveats to consider when contemplating the use of a nominee corporation in relation to real property for estate planning purposes. First, these arrangements will lose their utility regarding probate planning if they are not coupled with the use of dual/multiple wills. If the testator only executes one will, and that will requires probate, probate fees will be applicable in respect of the real property held by a nominee corporation, as its value would be included in the overall value of the estate for EAT purposes. Second, the incorporation of a nominee corporation and the subsequent corporate documents and tax returns involve both administrative time and costs. If a nominee corporation only holds a piece of real property, likely the ongoing administration will not be very costly and will be simple. However, this does require a cost-benefit analysis (comparing probate fees saved to the time and effort of establishing and maintaining a nominee corporation) to determine whether a nominee corporation may be a good suggestion for a given client.

Both these caveats help illustrate that arrangements such as the one outlined in this post involve complex estate planning. As such, be sure to weigh your options with your estate planner and other related professionals to ensure that all legal and financial matters involved in the use of a nominee corporation are effectively addressed and carryout the testator’s true intentions.

Note: For a broader discussion on other methods of minimizing taxes payable on death in relation to the testator’s real property, consider also reviewing Emily Hubling’s post, “Real Property and Probate: Quick Tips and Traps” (May 2018).

[1] In Ontario, probate fees of 1.5% will be payable on the value of your assets that are probated (i.e. the cumulative value of the assets included in a probated will). As you can imagine, probate fees can become substantial if the will includes real property of great value––an increasingly likely eventuality given Ontario’s current real estate prices!

About Corina Weigl
Corina Weigl is a partner in the Trusts, Wills, Estates and Charities group at Fasken, a leading international law firm with over 650 lawyers and 9 offices worldwide that offers comprehensive estate planning, estate administration, personal tax planning, charitable giving and estate litigation services. Email:


  1. Marinus

    May 1, 2020 - 1:56 pm

    Interesting opportunity, Has this been tested for that impact on the capital gains exemption of a primary residence? Any comments on that impact?

  2. Tom Hamer

    May 1, 2020 - 4:08 pm

    I am also curious to learn more about the tax implications.

    As usual, these posts are very timely and informative. Thanks for doing this!

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