CRA confirms that the s. 104(4)(a) deemed disposition rule for a spousal trust is engaged based on the trust terms at the time of its creation

IT-305R4, para. 8 states:

Once a trust qualifies as a spouse trust under the terms of subsection 70(6), it remains a spouse trust and is subject to the provisions affecting such trusts (for example, paragraph 104(4)(a)) even if its terms are varied by agreement, legal action or breach of trust.

CRA stated that the purpose of this wording was merely “to clarify that in applying paragraph 104(4)(a), one must look to the terms of the trust at the time of creation, such that any subsequent change in the terms of the trust would not invalidate the application of paragraph 104(4)(a).”

Neal Armstrong. Summary of 10 June 2016 STEP Roundtable, Q.11, 2016-0645821C6 under s. 104(4)(a).