23 May 2003 External T.I. 2003-0009685 - RRSP IN TRUST FOR ANOTHER PERSON

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 CCRA.

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

Principal Issues: Can RRSPs assets be held in trust for another individual?

Position: No.

Reasons:

Such an arrangement would preclude compliance with the RRSP registration rules.

2003-000968
XXXXXXXXXX Renée Shields
(613) 948-5273
May 23, 2003

Dear XXXXXXXXXX:

Re: Registered Retirement Savings Plan (RRSP) Assets "in trust for" another individual

This is in response to your electronic correspondence of March 21, 2003 inquiring whether a corporation or individual can hold RRSP assets in trust for someone else. The type of scenario you have described involves an employer that wishes to make conditional contributions to an employee's RRSP. If the employee fails to meet certain conditions, the contribution would have to be returned to the employer. We confirm that your question does not involve a spousal or common-law partner RRSP.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Customs and Revenue Agency ("CCRA"). All publications referred to herein can be accessed on the CCRA website at the following address: http://www.ccra-adrc.gc.ca/tax/technical/incometax/menu-e.html.

An RRSP is a retirement savings plan ("RSP") that has been accepted for registration under subsection 146(2) of the Income Tax Act (the "Act"). Accordingly, the definition of RSP in subsection 146(1) of the Act becomes relevant to your question. Generally speaking, an RSP is an arrangement between an individual and another party (the nature of whom depends upon whether the RSP is an insurance contract, a deposit or a trust) under which in consideration for payments of amounts by the individual to the other party, a retirement income will be paid to the individual upon maturity of the RSP.

The RRSP system is structured such that once amounts are contributed, they grow in the RRSP until paid out on maturity as retirement income payable to the annuitant of the RRSP or as early withdrawals by the annuitant, taxable in accordance with subsection 146(8) of the Act. Certain specific withdrawals, such as those made in conformity with the Lifelong Learning Plan and Home Buyers' Plan have special taxation rules. There is no mechanism for an employer or any other individual to retain or acquire any authority over the RRSP assets. Once contributed, assets become the property of the RRSP and must be administered in accordance with the rules prescribed by the Act. In this regard, we refer you to paragraph 2 of Interpretation Bulletin IT-320R3, which states that all qualified investments of an RRSP trust must be owned by the trustee of the RRSP trust.

We trust that these comments will be of assistance.

Yours truly,

Mickey Sarazin, C.A.

for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch