CRA compares the consequences of making or not making a s. 104(4)(a)(ii.1) election

As noted by CRA, if an alter ego trust does not make the s. 104(4)(a)(ii.1) election, it will be subject to a deemed disposition under s. 104(4)(a) at the end of the day of the settlor’s death, and a deemed year-end on that day under s. 104(13.4)(a). Alternatively, if the election is not made, there is no roll-in of property into the trust (but instead a deemed disposition at fair market value); however, on the death of the settlor, the trust will not have a deemed disposition, nor will there be a deemed year end under s. 104(13.4)(a) and, instead, a deemed disposition would typically occur on the trust’s 21^st anniversary.

Neal Armstrong. Summaries of 15 June 2021 STEP Roundtable, Q.13 under s. 104(13.4)(a) and s. 104(4)(a)(ii.1).