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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Whether a trust funded from the proceeds of an RRSP or RRIF available on the death of an individual would qualify as a "testamentary trust" within the meaning of subsection 108(1) of the Act, assuming that the RRSP or RRIF designation amounts to a testamentary instrument.
Position: Yes.
Reasons: Assuming that the RRSP or RRIF designation amounts to a testamentary instrument, then the transfer of the RRSP or RRIF proceeds to the trust would be considered, pursuant to subsection 248(8), as occurring as a consequence of the death of the taxpayer, thereby meeting the condition in paragraph (b) of the definition of "testamentary trust" in subsection 108(1).
XXXXXXXXXX 2003-000736
Éric Allard-Pouliot
June 20, 2003
Dear XXXXXXXXXX:
Re: Technical Interpretation Request : Review of technical interpretation E 2002-0143685
This is in reply to your electronic mail of March 10, 2003, regarding the above-noted subject. More particularly, you request that we reconsider the comments made in the last paragraph of technical interpretation E 2002-0143685 in light of subsection 248(8) of the Income Tax Act (the "Act").
In technical interpretation 2002-0143685, the issue was whether a trust, funded from the proceeds of a registered retirement income fund ("RRIF") or registered retirement savings plan ("RRSP") available on the death of an individual and the terms of which have been established by the deceased individual during his lifetime, separate from his will, would qualify as a "testamentary trust" within the meaning of subsection 108(1) of the Act. In this regard, we mentioned in the last paragraph of that technical interpretation that where the RRSP or RRIF properties are held in a trust, the contribution of these properties to another trust would be considered as being made by the trust and not by the deceased individual, thereby preventing the second trust from qualifying as a "testamentary trust" within the meaning of subsection 108(1) of the Act.
In light of paragraph 248(8)(a) of the Act, and assuming that an RRSP or RRIF designation amounts to a testamentary instrument, you ask whether the comments provided in that last paragraph would change so as to consider a trust settled from the proceeds of an RRSP or RRIF on the death of an individual to qualify as a "testamentary trust" within the meaning of subsection 108(1) of the Act.
Paragraph 248(8)(a) of the Act applies, among others, where a transfer, distribution or acquisition of property occurs under or as a consequence of the terms of a taxpayer's will or other testamentary instrument. In such a case, paragraph 248(8)(a) provides that for the purposes of the Act the transfer, distribution or acquisition is considered to occur as a consequence of the death of the taxpayer.
With respect to the situation outlined in technical interpretation 2002-0143685, paragraph 248(8)(a) of the Act would only find application where the designation by a taxpayer of a trust as beneficiary of his RRSP or RRIF upon his death amounted to a testamentary instrument under the applicable provincial legislation. In such a case, paragraph 248(8)(a) of the Act would apply and any transfer of property under the terms of that testamentary instrument would be considered as occurring as a consequence of the taxpayer's death and therefore, the transfer of these properties to the trust upon the death of the taxpayer would thereby meet the condition in paragraph (b) of the definition of "testamentary trust" in subsection 108(1) of the Act. It flows therefrom that the comments made in the last paragraph of technical interpretation E 2002-0143685 would not apply in a situation where the RRSP or RRIF designation amounts to a testamentary instrument.
The above comments are an expression of opinion only and are not binding on the Canada Customs and Revenue Agency, as explained in paragraph 22 of Information Circular 70-6R5. We trust that the foregoing will be of assistance to you.
Alain Godin
Section Manager
for Division Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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