The intended operation of a separation agreement can be undercut by death of the transferor spouse

A husband agreed in his separation agreement with his spouse to transfer to her a capital property, and the property in his RRSP. However, he died before the transfers were made. CRA confirmed that the transfers to her by his estate could not occur on a tax-deferred basis under ss. 146(16) and 73(1). Accordingly, it may be desirable in some circumstances (at least in the case of property held outside an RRSP) for the transferor spouse to seek the creation in the separation agreement of an immediate beneficial interest for the transferee spouse in the identified property.

When asked about this, a Finance representative stated:

The Department of Finance is ready to consider the issue identified in the question to determine whether the rules give rise to anomalies in certain circumstances in tax policy terms, in the context of its on-going revision of the ITA rules.

Well shy of a comfort letter!

Neal Armstrong. Summaries of 7 October 2016 APFF Financial Strategies and Instruments Roundtable, Q.5 under s. 73(1.01)(b) and s. 146(16).