All provinces other than Quebec impose a probate tax, levied at death, on the
value of your estate. Property held outside the province, for example real
estate, is generally excluded from the calculation. But, what about intangible
property such as shares, bonds or other securities that are held in electronic
form with your broker --where are they situated?
That was the question facing the B.C. Supreme Court earlier this year.
Bessie Bloom died in 2002 leaving an estate worth $350,000. When her will was
probated, her executor claimed that only $17,000 of the estate was held in
British Columbia since the remaining $333,000 of assets consisted of stocks,
bonds and debentures which were not held in physical certificate format but
rather were purchased by the securities department of the Bank of Nova Scotia
Trust Company in Toronto.
Ms. Bloom's ownership was evidenced by electronic entries in the books of the
securities department of the trust company and electronic entries in the books
maintained by the Canadian Depository for Securities Limited (CDS) located in
The main issue before the B.C. court was whether the phrase "situated in
British Columbia" in B.C.'s Probate Fee Act includes stocks, bonds and
debentures held in electronic format.
The government argued that where securities are held in CDS, there is no
practical way to trace their location. Accordingly, the location of a securities
portfolio should be "where the deceased most likely would have gone to conduct a
The Court disagreed and concluded that the location of Ms. Bloom's securities
was determined by the physical location of the financial investment intermediary
on whose books the interest was recorded, that being the securities department
of the BNS Trust Company, located in Ontario. As a result, the court concluded
that the securities were not situated in British Columbia and accordingly, not
subject to B.C. probate tax.
Last month, the B.C. government, obviously shocked by this decision and
realizing the potential loss in probate revenues that could arise as a result,
passed "The Miscellaneous Statues Amendment Act" which changed the law
retroactively to Jan. 30, 2004, the date of the Bloom decision.
The B.C. government did so by stating that the value of the estate for
probate purposes will now include "the intangible personal property [of the
deceased] immediately before the date of death, wherever situated."
Is the new B.C. legislation is constitutional? The Constitution gives each
province the power over direct taxation "within the province." Accordingly, each
provincial tax measure has to meet the test of being "within the province."
According to Joel Nitikman, a tax litigator with Fraser Milner Casgrain in
Vancouver, "This legislation covers property you may own in China, Russia or
Timbuktu. You have to wonder, is that really within the province's power to
That question will likely be answered by a constitutional challenge in the