11 May 1995 External T.I. 9503515 - SPOUSAL PLAN STATUS ON DEATH OR MARRIAGE BREAKDOWN

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:

	Maintaining "spousal plan" status after marriage 	breakdown or death.

Position TAKEN:

	Required until plan deregistered or annuitant or 	contributor die.

Reasons FOR POSITION TAKEN:

Routine.

XXXXXXXXXX 950351

Attention: XXXXXXXXXX

May 11, 1995

Re: Spousal Plan Status on Marriage Breakdown or Death

This is in reply to your facsimile transmission of February 8, 1995, in which you ask in what circumstances you need no longer treat a registered retirement savings plan (RRSP) or registered retirement income fund (RRIF) as a "spousal plan" as defined in subsection 146(1) of the Income Tax Act (the "Act"). Your concern relates to:

1.the income inclusion rules under subsections 146(8.3) and 146.3(5.1) of the Act and the exception therein with respect to a spouse ("taxpayer") who is living separate and apart from the annuitant by reason of the breakdown of their marriage; and

2.the exception to the income inclusion rules relating to the death of the taxpayer as contained in paragraphs 146(8.7)(a) and 146.3(5.5)(a) of the Act or the death of the annuitant (paragraphs 146(8.7)(d) and 146.3(5.5)(d) of the Act).

Subsection 146(1) of the Act defines a "spousal plan" as generally 1) an RRSP to which a taxpayer has, at a time when the taxpayer's spouse was the annuitant under the plan, paid a premium, 2) an RRSP which has received property from an RRSP or RRIF which is a spousal plan in relation to the taxpayer, and 3) a RRIF that has received property from an RRSP or RRIF which is a spousal plan in relation to the taxpayer. In addition to a person who is married to the taxpayer, a spouse, in accordance with paragraph 252(4)(a) of the Act, is also a person of the opposite sex who cohabits with the taxpayer in a conjugal relationship and is either the parent of the taxpayer's child or has cohabited with the taxpayer throughout a 12-month period ending before that time.

Once an RRSP or RRIF meets the definition of a "spousal plan", it does not lose this status. The status arises at the time the premium is paid to a spouse's RRSP or the property is received from the spousal plan; a subsequent change in the relationship of the two parties will affect neither the RRSP or RRIF for purposes of this definition in subsection 146(1) of the Act.

The income inclusion rule does not apply, however, where at the time an amount is received out of the spousal plan, the parties are living separate and apart due to a breakdown of their marriage or, as specified by paragraph 252(4)(b) of the Act, their conjugal relationship. In this case, the annuitant will include the amount received out of the RRSP or RRIF in income pursuant to, respectively, subsection 146(8) or 146.3(5) of the Act. There will be no attribution of income to the person who paid the premium.

The RRSP issuer or RRIF carrier is required to issue a T4RSP Supplementary or T4RIF Supplementary to the annuitant with respect to any amounts received out of the RRSP or RRIF. If the spouses are living separate and apart because of the breakdown of their marriage, the additional information concerning the contributor spouse (i.e. name and SIN) is not required on the T4RSP (see 1994 T4RSP and T4RIF Guide, Chapter 9 at Boxes 24, 36 and 38) or the T4RIF (see 1994 T4RSP and T4RIF Guide, Chapter 11 at Boxes 26, 32 and 34).

In our view, the issuer or carrier should maintain records pertaining to the status of a plan as a spousal plan until the plan is deregistered or the taxpayer or annuitant has died (see explanation of consequences on death below). Spouses may reconcile, even after a divorce, and the income attribution rule could apply again with respect to amounts received out of the RRSP or RRIF.

If the issuer or carrier is satisfied that, at the time an amount is received out of the spousal plan, the contributor and annuitant are no longer living together due to a breakdown of their marriage or conjugal relationship, then the additional information on the information slips need not be provided. Satisfactory evidence could include a copy of the decree absolute or separation agreement, but note that documentary evidence is not required by the Act. There is, in any event, no requirement that the issuer or carrier accept any proof provided with respect to a marriage/conjugal relationship breakdown. If there is a dispute, it would be acceptable to continue to insert the additional information on the information slips and request the taxpayers to contact the local tax services office should the contributor wish to invoke the exception contained in subsection 146(8.3) or 146.3(5.1) of the Act.

With respect to the situation where the taxpayer dies, the RRSP issuer or RRIF carrier is free to expunge the spousal plan information from its files since there can be no attribution to the taxpayer for years following the year of the taxpayer's death, and for the year of death, paragraph 146(8.7)(a) of the Act (RRSP's) and 146.3(5.5)(a) of the Act (RRIF's) provide that the attribution rules do not apply.

With respect to the annuitant's death, the RRSP issuer need no longer maintain the spousal plan information since subsection 146(8.8) of the Act deems the annuitant to have received an amount equal to the fair market value of the RRSP at the time of death, and paragraph 146(8.7)(d) of the Act provides that the attribution rules will not apply to that amount. Similar rules apply to a RRIF, namely subsection 146.3(6) and paragraph 146.3(5.5)(d) of the Act.

We trust our comments will be of assistance to you.

Yours truly,

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