29 June 2000 GST/HST Interpretation 13503 - Laws of Succession in the Province of Nova Scotia

This is in response to the e-mail of November 9, 1999, sent by XXXXX, requesting information regarding Case #HQR0001308, dealing with 'Estate Problems Effecting Title' in the province of Nova Scotia. As you are aware, after having reviewed the information provided, we agreed with the conclusion reached in the ruling of December 12, 1997, issued by the Atlantic TIS Centre in the matter of the XXXXX. The ruling stated that pursuant to section 267 of the ETA, the sale of real property by a deceased individual's estate would be treated in the same manner as if the sale had been completed before the individual had died.

As provided in our memorandum to the Atlantic TIS Centre, dated May 10, 1999, our position is that an "estate" exists for GST/HST purposes in Nova Scotia where an individual dies intestate. Although not expressly provided in the Nova Scotia legislation, the scheme set out in the Probate Act and Intestate Succession Act suggests that an estate exists and the letters of administration (issued upon submission of proof of intestacy) vest the authority in the court appointed administrator to act as the personal representative of the intestate's estate and trustee for persons beneficially entitled to the real and personal property. Generally, the administrator is responsible for identifying all persons entitled to any interest in the estate, filing an inventory of all real and personal property of the deceased with the court registry, and for the settlement of the estate (to "pay all legal and just claims" and make a "distribution" of the net value of the estate as directed by statute).

In Nova Scotia, the Intestate Succession Act sets out priorities among next-of-kin to receive a distribution of property from the estate. Paragraph 2(a) of this Act defines an estate as including both real and personal property and paragraph 2(c) defines "net value" of the estate to be equal to the value of all real and personal property owned by the deceased after payment of all charges, debts, funeral expenses, expenses of administration, succession duty and estate tax.

Beneficial and legal title to real property does not appear to vest in the heirs-at-law immediately at time of death. That such beneficiaries or heirs-at-law have a present, legal and existing right to alienate the property immediately from time of death is not clearly provided in the legislation. Persons beneficially entitled at law to share in the intestate's estate must share in accordance with the priorities established by the legislation. This scheme of distribution presupposes that legal title to the property vests in the administrator as trustee of the estate who, upon determining the entitlement of the various beneficiaries at law and deducting expenses enumerated in paragraph 2(c), may convey the legal title to them.

The Probate Act of Nova Scotia establishes the administrative procedures for administering estates. Upon appointment, an administrator's power relates back to the date of death of the intestate individual. The requirements of the following legislative provisions must be fulfilled prior to conveyance of title to real property:

•   Letters of administration must be granted as proof of intestacy (s. 12 of Probate Act)

•   The court appointed administrator must identify all persons beneficially entitled subject to the priorities established by the legislation (ss. 13(2) of Probate Act)

•   The administrator must file an inventory of all real and personal property of the deceased with the court registry, within three months after grant of letters of administration (s. 38 of the Probate Act)

•   The administrator must make an application for a citation served upon outstanding creditors, next of kin, and any person interested in the estate to attend an adjudication of the claims of creditors, the taking of the accounts of the administrator and the distribution of the estate (s. 70 of the Probate Act)

•   Should the personal property be insufficient for payment of debts and expenses of the deceased the court of probate may grant a licence to sell, mortgage or let for a maximum of 21 years real property (s. 50 and s. 64 of the Probate Act)

•   Where the court orders a sale of real property, any person, either the administrator or such other person as the court appoints on that behalf, may manage and conduct the sale, receive purchase money and execute deeds conveying the real property to the purchaser without it being necessary for the heirs or persons interested to join in such deeds (s. 103 of the Probate Act)

•   The administrator must pay "all legal and just claims" and must make a "distribution" of the estate as directed by the statutes. This reference to a "distribution" suggests that beneficial and legal title to real property does not vest immediately upon the death of the intestate individual (s. 68 of the Probate Act)

Therefore, the Nova Scotia legislation suggests that legal title to deal with property of an intestate vests in the administrator, who is given authority, pursuant to section 12 of the Probate Act, to act on behalf of and distribute the net value of the estate to those persons beneficially entitled. This supports the argument that title to real property of an intestate does not vest directly with the heirs-at-law immediately at the time of death of the individual.

Thus, by operation of law in the province of Nova Scotia, the court appointed administrator acts on behalf of the estate of the intestate. Based on the scheme of the Nova Scotia legislation, [s]ection 267 of the ETA, subject to sections 267.1, 269 and 270, puts the estate of the deceased individual in the same position that the individual was in. This section sets out rules dealing with passage of property of a deceased individual to the executor of the individual's will or the administrator of the individual's estate. Pursuant to section 267.1 of the ETA, anything done by the personal representative of the deceased individual is deemed to have been done by the deceased individual, as the individual would have done in his lifetime. Section 269 of the ETA applies to an administrator of an estate, who, as a personal representative/trustee of the estate of the deceased individual, has authority to distribute the estate/trust property. This provision deems the distribution of property to be a supply of it by the estate/trust for consideration equal to the amount determined for income tax purposes to be the proceeds of disposition.

Accordingly, the administrator is ultimately held accountable for his actions and must comply with the scheme of distribution of the net value of the estate pursuant to the laws of succession in the province of Nova Scotia.

I trust you will find the foregoing satisfactory. Should you have any further questions, please do not hesitate to contact me at (613) 957-8226 or Larry Springstead at (613) 952-9220.

Indra Singh
Technical Officer
Corporate Reorganizations Unit
Financial Institutions and Real Property Division