23 March 2012 External T.I. 2009-0327251E5 - Spousal Trust

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.

Principal Issues: Whether payments received by an individual from 1. a RPP 2. a RRIF, can be reported and taxed as income of the individual's joint spousal trust.

Position: 1. No. 2. No.

Reasons: 1. The Act does not provide for payment of periodic retirement benefits to a spousal trust. 2. The annuitant under a RRIF does not include a spousal trust.

XXXXXXXXXX 2009-032725
Saskia deLang-Lenters
March 23, 2012

Dear XXXXXXXXXX :

Re: Joint spousal trust

This is in response to your queries concerning a joint spousal trust where such trust is resident in Canada and has no foreign assets or income. You enquire whether the following income received by an individual can be reported and taxed as income of the individual's joint spousal trust:

1. payments from a company pension plan;

2. payments from a self-directed Registered Retirement Income Fund (RRIF).

Question 1

Where an individual receives payments from a company pension plan, can this income be reported and taxed as income of the individual's joint spousal trust?

Subparagraph 56(1)(a)(i) of the Income Tax Act (the "Act"), includes in computing the income of a taxpayer for a tax year, amounts received by the taxpayer in the year as, on account of, in lieu of payment of or in satisfaction of pension benefits.

Subsection 147.1(1) of the Act, states that a "member" of a pension plan means an individual who has a right either immediate or in the future and either absolute or contingent, to receive benefits under the plan, other than an individual who has such a right only by reason of participation of another individual in the plan. Subsection 8500(1) of the Income Tax Regulations (the "Regulations") states that "retirement benefits" provided to an individual under a benefit provision of a pension plan means benefits provided to the individual under the provision that are payable on a periodic basis.

Subsection 8501(1) of the Regulations prescribes the conditions for a pension plan to be registered and includes the provision that the plan meet the condition in paragraph 8502(f) of the Regulations. Paragraph 8502(f) of the Regulations states that for the purposes of section 8501 of the Regulations, the plan must include a stipulation that no right of a person under the plan is capable of being assigned, charged, anticipated, or given as security or surrendered. An exception is provided under clause 8502(f)(i)(A) of the Regulations where an assignment is made pursuant to a decree, order or judgment of a competent tribunal or a written agreement in settlement of rights arising out of a marriage or common-law partnership on or after the breakdown of the marriage or common-law partnership. This information is provided in paragraph 11 of the CRA Interpretation Bulletin 499R, Superannuation or Pension Benefits and in paragraph 4 of Interpretation Bulletin 440R2, Transfer of Rights to Income.

There is no provision of the Act which provides for retirement benefits payable to a member to be transferred to and taxed as retirement benefits received by the member's joint spousal trust.

Question 2

2. Where an individual receives payments from a self-directed RRIF, can this income be reported and taxed as income of the individual's joint spousal trust?

Subparagraph 56(1)(t) of the Act includes in computing a taxpayer's income for a tax year amounts received in respect of a RRIF pursuant to section 146.3 of the Act. Subsection 146.3(5) of the Act, in particular, requires a taxpayer to include in computing income for a tax year all amounts received by the taxpayer out of or under a RRIF, other than certain amounts that are excluded.

Subsection 146.3(1) of the Act states that a RRIF is an arrangement between a carrier and an annuitant under which the carrier agrees to make payments to the annuitant and, if the annuitant elects, to the annuitant's spouse or common-law partner after the annuitant's death.

The carrier of a RRIF is defined in subsection 146.3(1) of the Act and is a person or corporation authorized under the laws of Canada to make payments under a RRIF to the individual who is the annuitant under the fund. The definition of annuitant in subsection 146.3(1) of the Act provides that the annuitant under the RRIF at any time means;

(a) the first individual to whom the carrier has undertaken to make payments out of or under the RRIF where the first individual is alive,

(b) after the death of the individual, a spouse or common-law partner of the first individual,

(c) after the death of the surviving spouse described in (b) above, another spouse of the surviving spouse.

The terms annuitant, spouse or common-law partner of the annuitant to whom payments out of or under the RRIF are made, have meaning only in reference to natural persons.

The definition of annuitant does not include a spousal trust. Therefore, the right to payments from a self-directed RRIF to an annuitant cannot be transferred, or assigned, and taxed as income of the annuitant's joint spousal trust.

Subsection 146.3(6) of the Act provides that, where the last annuitant under a RRIF dies, that annuitant shall be deemed to have received, immediately before death, an amount out of or under a RRIF equal to the fair market value of the property of the RRIF at the time of death. Thus, except in circumstances where the annuitant's spouse is the successor annuitant of the RRIF after the initial annuitant's death, the fair market value of the RRIF property is brought into the deceased's income for the year of death.

We trust that these comments will be of assistance.

Yours truly,

Roger Filion
A/Director
Financial Industries Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch