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:
Whether a personal trust results from a curtesy election .
Position TAKEN:
No trust results from or is crested by such an election. Whether subsequent arrangements result in a trust is a question of fact.
Reasons FOR POSITION TAKEN:
Effect of curtesy election is that widower acquires a life estate in the real property owned by his wife while the children acquire the remainder estate. A life estate and remainder estate in real property are not the same as an income interest and capital interest in a trust.
943325
XXXXXXXXXX T. Murphy
Attention: XXXXXXXXXX
March 8, 1995
Dear Sirs/Mesdames:
Re: Definitions of Personal Trust and Principal Residence
This is in reply to your letter dated December 21, 1994 wherein you enquired whether property will qualify to be designated as the principal residence of a personal trust in the hypothetical situation where:
1.a married woman owning the matrimonial home dies intestate prior to 1978,
2.Letters of Administration are issued to the widower as administrator of his wife's estate,
3.the widower elects to receive a courtesy interest in her estate, and
4.the widower holds legal title to the property and continues to occupy the property as his home.
The first issue to be addressed is whether a trust exists. Such a determination would require a full consideration of all facts and surrounding circumstances. If you are aware of an actual situation involving a courtesy election you may wish to discuss it with officials of the local tax services office. We offer the following general comments for your consideration.
The characteristics of a trust are described by D.W.M. Waters in Law of Trusts in Canada, pp. 10-14 as (1) a fiduciary relationship between the trustee and the beneficiary, (2) dual ownership of the property by the trustee and the beneficiary, and (3) trust property is not available to the creditor of a bankrupt trustee. At pages 107-128 of that same text the three certainties - intention, subject matter and objects - required for the existence of a trust are discussed.
Courtesy is defined in Black's Law Dictionary (Sixth Edition) as:
The estate to which by common law a man is entitled, on the death of his wife, in the lands or tenements of which she was seised in possession in fee-simple or in tail during her coverture, provided they had lawful issue born alive which might have been capable of inheriting her estate. It is a freehold estate during the term of his natural life.
Thus, as indicated in your letter, the effect of a courtesy election would be that a widower acquires a life estate in the real property while the children acquire the remainder estate. In our opinion, no trust would be involved in, or result from, making such an election. A life estate and a remainder estate in real property are not the same as an income interest and a capital interest in a trust. Whether arrangements in place subsequent to making a courtesy election result in the existence of a trust would be a factual determination.
As we cannot determine whether a trust exists we will not address the personal trust and principal residence issues. If you are aware of an actual situation involving a courtesy election, we recommend that you discuss it with officials of your local tax services office.
Yours truly,
R.S. Biscaro
Director
Manufacturing Industries, Partnerships
and Trusts Section
Rulings Directorate
Policy and Legislation Branch
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