18 August 1998 Internal T.I. 9811766 - GRANDFATHER, RRSPS FOR GRANDCHILDREN

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: Could a grandfather establish an RRSP for minor grnadchildren?

Position: No

Reasons: Since the minor grandchildren did not enter into an arrangement with a trust, no retirement savings plan could exist.

		August 18, 1998

	HEADQUARTERS	HEADQUARTERS
	Robert D’Aurelio	M.P. Sarazin
	Director	952-9853
	Registered Plans Division

	Attention:  Margaret Gussow
		981176

Annulment of Nugget Registered Retirement Savings Plans

We are writing to you in respect of your Round Trip Memorandum dated May 5, 1998, wherein you requested our comments regarding the letter (the “Letter”) you received from the XXXXXXXXXX requesting the annulment of several registered retirement savings plans (“RRSPs”) established by XXXXXXXXXX (the “Grandfather”) for each of his grandchildren, none of whom have reached the age of 18.

Our understanding of the facts, based on the Letter, is that all of the RRSPs were established XXXXXXXXXX. No one knows whether the grandchildren claimed a deduction for the RRSP receipts issued to them in respect of their Grandfather’s contributions to their respective RRSPs.

Comments

A “retirement savings plan” is defined in subsection 146(1) of the Income Tax Act (the “Act”). In respect of a trust, it is defined as an arrangement under which payment is made by an individual or the individual’s spouse in trust to a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee, of any periodic or other amount as a contribution under the trust. A “registered retirement savings plan” is defined in subsection 146(1) of the Act to mean a retirement savings plan accepted by the Minister for registration for purposes of the Act as complying with the requirements of section 146.

It is evident that a retirement savings plan must exist before it may be registered for purposes of the Act. In the above situation, the grandchildren have not entered into an arrangement with the trust nor have they made payments to the trust as required under the retirement savings plan definition. Therefore, there was no retirement savings plan that could be registered for purposes of the Act and the arrangements would not qualify as registered retirement savings plans.

We believe that the Grandfather put money into trusts established for each of his grandchildren and, since the grandchildren were under the age of eighteen, the provisions of subsection 74.1(2) should apply in respect of the income earned by the particular trusts. Consequently, the income earned on the amounts placed in the trusts would be attributed back to the Grandfather until the particular Grandchild turns eighteen.

We trust that the above comments will be helpful in your review of the above request for the annulment of the individual RRSPs.

Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate