CRA finds a tainting effect of the payment by a spousal trust of premiums on its policy on the lives of the children

In various interpretations, CRA has indicated that the fact that a spousal trust, holding a policy on the life of the spouse, paid the premiums, had the effect of tainting the trust for s. 70(6) rollover purposes. CRA has now confirmed that the same tainting occurs where a spousal trust, holding a life insurance policy on the lives of the children of the trust (who are the residuary beneficiaries of the trust on the death of the spouse), pays the policy premiums.

Neal Armstrong. Summary of 5 October 2018 APFF Financial Strategies and Instruments Roundtable, Q.7 under s. 70(6)(b)(ii).