In British Columbia, one of the forms required in an application for probate of a will, or letters of administration, is an affidavit of executor, with a schedule of the deceased’s assets, liabilities and distribution. This schedule is often referred to as the “disclosure document.”
The form of affidavit required is set out as Form 69, in Appendix A, of the Supreme Court Rules.
The disclosure document requires the executor to state whether an asset is “within” or “without” British Columbia. This is not always as straightforward as it may seem. It is pretty easy to tell if certain kinds of assets such as land are within British Columbia. But it is much more complex to determine if other kinds of assets, such as financial investments, are within British Columbia.
You can distinguish between physical assets, or “tangible assets,” such as cars and tables, from “intangible assets,” such as bank accounts, shares in corporations, and mutual funds. If the deceased owned mutual funds that are made up of securities of companies located all over the world, where are the funds located?
In law, how do you determine whether intangible assets are within or without British Columbia? This question was answered in respect of securities by Mr. Justice Ehrck, in Re: The Estate of Bessie Bloom, 2004 BCSC 70. The securities are situated in the place where “the financial investment intermediary on whose books the interest of the deceased is recorded and where her personal representative must go to effect the transmission.”
To set out whether an intangible asset is within or without British Columbia, the executor will often have to make inquiries of financial institutions to determine where the deceased’s interest is recorded.
What is the point of requiring an executor to say whether an intangible asset is within or without British Columbia? None.
The Probate Fee Act used to provide that British Columbia probate fees were calculated on assets situated in British Columbia (but not on the value of assets situated outside of British Columbia). Accordingly, it made sense to require executors to disclose whether an assets was within or without of B.C. so that the probate fees would be calculated only on assets within British Columbia.
But the effect of the decision in Re: Bloom was to significantly reduce the probate fees the government collected. Many British Columbians hold investments through financial institutions that keep their books recording the interests of their customers in Toronto or other cities outside of British Columbia.
So the Provincial Government amended the wording of the Probate Fee Act so that probate fees were payable in respect of all “intangible personal property of the deceased, wherever situated,” if the deceased was ordinarily resident in British Columbia immediately before death. This was done by amending the definition of “value of the estate” in section 1. (The constitutionality of taxing assets outside of British Columbia is open to doubt, but it has not as yet been challenged.)
Accordingly, now that the probate fees apply to intangible assets of British Columbia residents, irrespective of the location of those assets, there is no point in making the executor find out and disclose whether those assets are within or without B.C.
But in its haste to protect its tax base, the British Columbia did not amend the prescribed form of the disclosure document so that it is in keeping with the information required to calculate the probate fees. I note that new Supreme Court Civil Rules that will come into affect on July 1, 2010, keep the outdated form of disclosure document (Appendix A, Form 91). In fairness, the reform of the Supreme Court Rules was directed toward law suits, rather than estates. The British Columbia Law Institute has a Probate Rules Revision Project. I hope it will look at this issue.
The probate forms could be amended to require the applicant to state whether to the best of his or her knowledge the deceased was “ordinarily resident” in British Columbia immediately before death. The disclosure document would then deal with intangible assets separate from tangible assets. The applicant would disclose whether each of the tangible assets is within or without B.C., but would not be required to state the location of intangible assets.