ESTATE TRANSFERS. 1. "Succession duties - are they gone?"

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1 1 ESTATE TRANSFERS I have been asked to address several issues relating to transactions where real property passes through an estate. While this paper is confined to those issues, I would commend to practitioners the materials from previous CLE conferences, particularly "Estate Problems Affecting Title" by Timothy C. Matthews, in Real Estate, October 9, 1992, and "Estates and Real Estate Transfers " by Donald S. Taylor, in Estate Practice, October 8, Both papers address a number of other issues of which the solicitor acting for either vendor or purchaser should be aware. Bar Admission Course materials are also a useful resource. 1. "Succession duties - are they gone?" There have been in the past two tiers of succession duties, those levied under provincial legislation, and those levied under federal legislation. In each instance, the duties were levied on the value of property passing upon death, and statutory liens were created. By virtue of section 63(1) of the Estate Tax Act, R.S.C. 1970, c. E-9, as amended, the Dominion Succession Duty Act, R.S.C. 1952, c. 89, as amended, does not apply in the case of a person who died after December 31, Any lien on real property in Canada in favour of the Crown for succession duty, created under section 25(3) of the Dominion Succession Duty Act, ceased to exist on May 28, 1980 by virtue of Section 23(3) of the Miscellaneous Statute Law Amendment Act, 1984, S.C. 1984, c. 40. When the Estate Tax Act replaced the Dominion Succession Duty Act, it applied to persons who died after December 31, 1958, and it affected those persons who died up to the end of section 2 of Part II of the Income Tax Act, S.C , c. 63 provided that the Estate Tax Act would not apply to persons who died after

2 The statutory lien created in section 47 of the Estate Tax Act was also deemed to cease to exist on May 28, 1980 by section 26(4) of the Miscellaneous statute Law Amendment Act, Both federal Acts provided that a consent to the transfer of real property would satisfy any lien created under the legislation. Therefore, where a consent to transfer was issued, it was commonly attached to the Deed on record at the Registry. If no consent was attached to a instrument transferring real property, or registered in some other manner before the conveyance, one can now take comfort in the provisions of the Miscellaneous statute Law Amendment Act, 1984, as far as federal succession duty or estate tax is concerned. Quaere whether the same can be said of provincial legislation. In this province, we have the Succession Duties Act, S.N.S. 1972; c. 17, as amended. It created duty to be paid by the successor to property based on the aggregate net value of the pioperty, at varying rates. Under section 62, a lien for the duty was created, and the Minister was "empowered to file a certificate of lien at the Registry of Deeds, which lien in favour of the government was "subject to any other interests or encumbrances filed prior thereto". Under section 46, provision was made for consent to transfer, which under Section 62(1) was deemed a withdrawal or discharge of the lien. The duty was imposed originally in the cases of persons who died after December 31, 1971, and prior to January 1, 1975, and the property of such persons. The end of the period of applicability was changed to April 1, 1974 by Chapter 30, S.N.S The administration of the Act was undertaken by agreement with the federal administration of income tax legislation. As far as the writer can determine, only one form of consent to transfer was

3 3 issued, which would cover both provincial and federal succession duties. section 46 provided that the written consent of the Minister must be obtained before any property of a deceased is transferred, (subject to section 18 (1) which deals with nonresidents), and by Section 46 (2), the Act provided: "Unless the consent in writing of the Minister is filed or registered prior thereto, or at the same time, no transfer of, assignment of, or agreement to sell real property of a deceased shall be filed or registered in a registry office, or received by a registrar for filing or registration in a registry office." (emphasis added) Therefore, it would appear that a title search should never reveal an instrument effecting such a transfer where no consent to transfer has been filed. It should be noted however, that there is no legislation which deems the lien to cease to exist, as in the case of the federal liens, and which seems to clear up the issue for those liens. Should an instrument be filed without the consent to transfer, it appears that the Minister would actually have to file a certificate to enforce the lien, which can be enforced in the same way as a judgment of the Supreme Court on which a certificate of judgment has been issued. If no certificate is filed, it would appear that succession duty should not be a concern. In any case, it is a concern only as it relates to property of those persons who die between the legislated dates. It is noted that the time for payment and the appeal periods in the Act would mean that there would be relatively few instances where this will now be a concern. Practitioners will also want to note that the provisions of the Gift Tax Act, S.N.S. 1972, c. 9, as amended, which although providing for a tax on gifts made during the prescribed period, are

4 4 similar in many respects to the Succession Duties Act, exempt a testamentary gift under section loeb). 2. "If there is no vesting clause into the executors, do all the residual beneficiaries have to sign, or is there an implied vesting?". As has been pointed out by previous writers, and by C. W. MacIntosh in his Nova scotia Real Property Practice Manual, in the absence of provision in a will to the contrary, in this Province, unlike other jurisdictions, upon death, real property vests not in the personal representative, but in the heirs at law. This raises the question of whether the executor or trustee has the power to sell. This issue was canvassed in detail by Timothy C. Matthews in the article referred to at the beginning of these materials. If the real estate has been devised directly to a specific beneficiary, then that beneficiary can convey the property without the personal representative joining in the deed. If there has not been a direct devise to a beneficiary, it is only where the personal representative has the direct or implied power to sell, or where the Probate Court or Supreme Court had granted either a licence to sell or a partition order authorizing the sale, that the personal representative can execute the deed without the signature of residual beneficiaries. There may be a provision in the will for the Executo~ to whom the property is devised in trust, to convey property to a specific individual. If the property is to be sold to a third party, then as suggested by Matthews, the property should be conveyed by the Executor to the specific individual, who can then convey to the third party. If the executor conveys directly to the third party,

5 then the specific individual should also join in the deed. 5 It should be remembered that in some cases, a residuary beneficiary may be required to join in the deed to release an interest under the Matrimonial Property Act, or beneficiaries might join in the Deed to release any options they may have been given under the Will, or rights of occupation of the property. The solicitors involved should carefully review the will to ensure that all interests are being conveyed and/or released. If the property is devised to the executor in trust without any direction as to a conveyance to a specific beneficiary, and the Will contains a power of sale clause, the executor can clearly convey the interest of the purchaser. If the real estate is devised to the executor in trust, and there is no express power of sale, but the executor is instructed to divide the residue among a number of beneficiaries, then on the basis of the decision of the Supreme Court of NoVa scotia in Re Courtney, [1944] 4. D.L.R. 80, the executor has an implied power of sale, and can convey the interest of the deceased without the residuary beneficiaries joining in the Deed. What of the situation where there is no specific direct devise of property to a beneficiary, no devise to the executor in trust, and further, no direction to the executor to divide the residue? This is not uncommon in older styles of wills where an executor is named and directed to pay debts, and the will then states that the testator gives the residue of the estate to certain beneficiaries. In Re Bennett's will, (1968) 5 N.S.R. 196, the will provided that the executrix was empowered "subject to the terms of... [the] will hereinbefore set forth... to sell the whole or any part of my real and personal property... and... to execute and deliver all.. deeds... which may be deemed necessary or advisable. ". Further the will contained a direct devise to the spouse (who was

6 6 also the executrix) of all the property of the testator, with a further provision for devise to his children if the spouse predeceased the testator, died within 30 days of his death, or remarried. Pothier, J. found that the power of sale was only given with respect to the settlement of the estate and specifically the payment of debts, funeral and testamentary expenses. He found that the executrix did not have the power to sell the property for any other purpose. The inference from that decision is that the residual beneficiaries would all have to join in a deed, and as they were minors, the proper procedures followed. In Haagsma v. Millward (1986), 75 N.S.R. (2d) 358, Tidman, J. appeared to have taken a broader view. In that case the terms of the will did not devise the property to the appointed executors, but after making certain bequests, the testatrix gave "all the rest and residue of the estate" to her six children, of whom three were. the executors. The Will did contain clause which specifically authorized and empowered the executors to convey all real property and enter into and execute agreements and deeds. Unlike Re Bennett's Will, supra, the authority to sell was not made subject to any other provisions of the will. An objection to title was made on the basis that a deed had been given by the executors, and not executed by the six children. Tidman, J. considered certain ontario cases, as well as Re Courtney, supra, and concluded that the testatrix"... intended that her executors should have the power to convey the real estate. Otherwise they would have been unable to carry out her direction to divide the residue of her estate among her six children in equal shares." (at page 360). He found that the real property impliedly vested in the executors, who had given a valid deed. Matthews suggests that this case is wrongly decided as it relies on ontario cases, where property vests by statute in the personal representative. In Haagsma, unlike the Nova scotia cases referred to herein, there is an express (and unconditional) power of sale.

7 7 However, the decision does not reveal that the testatrix had directed a division of her property, which was at least clear in the Re Courtney will. It is certainly arguable that division is not implicit in a gift to more than one person, nor is it implicit that the assets of the estate must be realized to give effect to the gift. Donald S. Taylor, in his paper referred to herein, says that the Court will imply a power of sale if, from the terms of the will, it is clear the executor was to convert the property, citing Murphy v. McGibbon (1913), 13 Eastern Law Reporter 160, a decision of the Nova scotia Supreme Court. Had the power of sale not been included in the will in Haagsma, it is submitted that the decision would have been a different one. While practitioners might choose to rely on the decision, it must be remembered that this was an application under the Vendors and Purchasers Act some nine years after the will in question had been probated. In the opinion of this writer, the decision should not be considered as a binding authority in all cases. Therefore, it is recommended that where purchasing from an estate in such circumstances, the residuary beneficiaries should be required to join in the deed. Clearly their signatures will be required if there is no direction to the executors to divide the residue as in Re courtney, or no power of sale expressly included in the will, or if it is not clear on the wording of the will that the personal representative is to convert the property. 3. "Should death certificates be attached to deeds?" It is interesting to note that the Registry of Probate does not require a death certificate before granting probate or administration. When a will is recorded at the Registry, there is no indication of the date of death of the testator, although the date of death appears in the Petition for Administration which is recorded. If the will or Petition is recorded, is it necessary to

8 8 have further proof of death? It seems desirable to include in a deed transferring the property of a deceased recitals which refer to the date of death, the date of granting of probate, the recording particulars of the Will, and to the right of the parties executing the Deed to sell. Therefore, it may be considered useful to include a copy of the death certificate as a Schedule to substantiate the death. However, if the deceased died testate but probate had not been sought because all assets were jointly held, it would be more useful to attach the Death certificate of a deceased joint tenant, in a deed which transfers the interest of a surviving joint tenant, in addition to a recital. Pursuant to section 2 (a) of the Vendors and Purchasers Act, R.S.N.S. 1989, C. 487, recitals in documents which are twenty years old or more can be relied upon as accurate, unless there is evidence to the contrary; the attaching of a death certificate would certainly provide corroboration which would make a solicitor more comfortable now, rather than waiting for-twenty years to pass.

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