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.
December 17, 1996
Vancouver Tax Services Office Trusts Section
433-21 L. Holloway
(613) 957-2104
Attention: Stan Gingrich
962572
Remarriage Clause
This is in reply to your memorandum dated July 22, 1996, concerning the application of subsection 70(6) to a situation whereby a remarriage clause will be removed from a will by court order. We apologize for the delay in our response.
Your memorandum and related enclosures describe a situation brought to your attention by the Audit Division of the Sudbury TSO whereby the terms of a taxpayer's will preclude the application of subsection 70(6) to the property held by the taxpayer upon his death. Basically the will provides that the widow is entitled to receive the income of the estate but that her entitlement is "to be terminated upon her death or remarriage" and that capital is distributable to the residuary beneficiaries upon her "death or remarriage". The presence of such clauses in the will prevents subsection 70(6) from applying by reason of noncompliance with subparagraphs 70(6)(b)(i) and (ii).
The taxpayer's representative has asked that the Department accept subsection 70(6) as applying to the property of the deceased if a court order is obtained removing the remarriage clauses from the will. It is noted that the consent of the residuary beneficiaries will also be obtained and presented to the court.
You had asked whether an Ontario court could delete a standard remarriage clause from a will and if so would the court order then have the result of satisfying paragraph 248(9.1)(a) and paragraph 248(9.1)(b). It was your understanding that neither the courts nor the beneficiaries could remove a standard remarriage clause from a will as removal of this clause would defeat the intention of the testator.
We could not find any published literature addressing the issue of removing a remarriage clause from a will by court order. However, our files indicate that the removal of such a clause is possible.
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In such a case, there is no need to look at paragraph 248(9.1)(b) as the trust was in fact created under the terms of the will; i.e. although the will may have been altered by court order, it was not created by court order as contemplated by paragraph 248(9.1)(b).
Where a court order is received outside the 36-month period, the question of retroactive application becomes an issue. In Dale v. The Queen1 after referring to the differing reasons of the three judges of the Federal Court of Appeal in Hillis v. The Queen2 and the Federal Court of Appeal decision in Boger Estate v. M.N.R.,3 Bowman, J.T.C.C., alluded to the uncertainty in this area, saying:
As I read the Hillis decision and the subsequent decision in Boger it would appear that, whatever might be the effect of a specific statutory provision, a court order purporting to have retroactive effect cannot create a state of affairs in an earlier year that did not in fact exist.4
(Emphasis added.)
Consequently, we should accept that the property vests indefeasibly in the spouse trust only if the court order is made within 36 months from the date of death.
T. Murphy
A/Section Chief
Resources, Partnerships and
Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
ENDNOTES
1. 94 DTC 1100.
2. 83 DTC 5365. Only one of the three judges based his decision on the fact that the relevant provincial legislation stated that an order made under that legislation was effective from the death of the taxpayer. Pratte, J., (dissenting in part) said, at page 5374:
(...) when did the estate become indefeasibly vested in Mrs. Hillis? In my view, when the disclaimers were executed and when the order was pronounced since the effects of the disclaimers and the Court order, in spite of their retroactivity, did not exist as long as the disclaimers were not executed and the Court order was not pronounced. It is only when the disclaimers were executed and the Court order was pronounced that Mrs. Hillis became entitled to the whole of her husband's estate with retroactive effect to the date of his death.
3. 93 DTC 5276.
4. 94 DTC 1000, at 1112.
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