20 September 1996 External T.I. 9611055 - GIFT BY WILL

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Can subsection 118.1(5) apply where charity is the designated beneficiary in an RRSP.

Position:

No.

Reasons:

The deceased is not considered to have made the gift and neither has the estate. Because of the fact that the charity is the designated beneficiary under the RRSP, the amount is paid to fulfil a legal obligation of the RRSP.

									961105
XXXXXXXXXX							A.M. Brake

Attention: XXXXXXXXXX

September 20, 1996

Dear Sirs:

Re: Charity as Beneficiary of RRSP

This is in reply to your letter of March 21, 1996, regarding a situation where a taxpayer wishes to leave the balance in his RRSP on his death to a Canadian registered charity either by naming the charity as the designated beneficiary in the RRSP or having a provision in his will which he names the charity as the designated beneficiary of the RRSP. In your view, the former would not entitle the estate to a charitable donation because subsection 118.1(5) requires the gift be made "by the individual's will". You asked whether making the designation in the taxpayer's will would satisfy the requirements of subsection 118.1(5), such that the taxpayer's estate would be entitled to a charitable donation equal to the balance in the RRSP on the taxpayer's death. We apologize for the delay in replying.

Our Comments

Where the beneficiary of an RRSP is other than the spouse of the deceased annuitant, the deceased annuitant is deemed under subsection 146(8.8) of the Income Tax Act (the "Act") to have received, immediately before death, a benefit out of the RRSP equal to the fair market value of the RRSP at the time of death. Consequently, the amount of the benefit would be required to be included in computing the deceased's income in the year of death.

Any amount paid to the charity as beneficiary under the RRSP would not be a gift to the charity by either the estate or the deceased for the purposes of the Income Tax Act but, rather, would be a payment made to fulfil a legal obligation on the part of the RRSP. Where the charity is the beneficiary to the RRSP, the charity, by virtue of subsection 160.2(1) of the Act, would be jointly and severally liable with the estate for any increased tax liability arising as a result of the inclusion in the deceased's income of the benefit referred to above.

Generally, we would consider that a gift has been made by an individual's will where the individual names themselves as beneficiaries to an RRSP and then bequests the amount by will, by specifically mentioning the bequest in the will as a distribution to be made by the estate.

Our comments are an expression of opinion only and are not binding on the Department as explained in paragraph 21 of Information Circular 70-6R2. We trust, however, that they are of assistance.

Yours truly,

R. Albert
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch