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: Does the Act prohibit a surviving spouse from being the sole trustee of a testamentary trust created by the deceased spouse?
Position: No.
Reasons: The Act does not contain any restrictions as to the trustees for a testamentary trust.
1999-001291
XXXXXXXXXX A. Seidel
(613) 957-8974
Attention: XXXXXXXXXX
May 23, 2000
Dear Sirs:
Re: Testamentary Trusts
This is in reply to your letter dated December 1, 1999 concerning the formation of a "testamentary trust", within the meaning thereof in subsection 108(1) of the Income Tax Act (the "Act"), where the surviving spouse is the sole trustee of the trust and will receive the income from the trust during their lifetime. Upon the death of the surviving spouse, their "Will" will provide for the creation of three separate testamentary trusts for the adult children of the surviving spouse.
The situation described in your letter appears to relate to specific taxpayers and an actual fact situation. To the extent that you require assistance in determining the current tax status of the taxpayers involved, you should contact your local tax services office. To the extent that you require confirmation of the tax consequences of proposed transactions, we bring to your attention Information Circular 70-6R3 ("IC 70-6R3") dated December 30, 1996 issued by the Canada Customs and Revenue Agency (CCRA). Confirmation with respect to proposed transactions involving specific taxpayers should be the subject of a request for an advance income tax ruling. If you wish to obtain an advance income tax ruling for particular taxpayers with respect to specific contemplated transactions, a written request for an advance income tax ruling should be submitted in accordance with the Information Circular. Nevertheless, we can provide you with the following general comments.
Whether or not a transfer of property satisfies all of the requirements of subsection 70(6) of the Act is a question of fact which can only be determined after a review of all of the relevant facts relating to a particular situation. Provided that all of the other requirements of subsection 70(6) of the Act are satisfied, paragraph 70(6)(b) of the Act permits, in certain situations, that property may be transferred to a trust. There is no specific provision in the Act which prohibits a surviving spouse from being the sole trustee of such a trust created by the deceased spouse. In the situation where the surviving spouse actually becomes the sole trustee under such a trust, several provisions in the Act, which outline obligations of a trustee, would become applicable. This would include the filing of returns pursuant to subsection 150(3) of the Act, being jointly and severally liable for any amount payable under the Act pursuant to subsection 159(2) of the Act, obtaining a certificate, as required by subsection 159(2) of the Act, before any property is distributed from the trust and the requirements outlined in subsection 227(5) of the Act in respect of certain payments made by the trust. Similarly, there is no provision in the Act which prohibits an adult child of the surviving spouse from becoming the sole trustee of a trust pursuant to the "Will" of the surviving spouse.
Finally, although the Act does not prohibit a surviving spouse from being the trustee of a trust, it is our understanding that there may be conflict of interest concerns under provincial "Family Law" legislation in those situations where the surviving spouse is both the executor of the deceased's estate and the trustee of the testamentary trust.
These comments are provided in accordance with the guidelines set out in paragraph 22 of IC 70-6R3 and are therefore not binding on the CCRA.
Yours truly,
for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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