2015-0601141E5 Delay in final distribution from spousal trust

Principal Issues: Where a will is drafted to create a testamentary spousal trust and the will provides that the final distribution date of the trust is three years after the death of the surviving spouse, would the trust be precluded from being a spousal trust pursuant to subsection 70(6)?

Position: Question of fact and law; generally, such extension would not in and by itself prevent the trust from qualifying as a spousal trust.

Reasons: The conditions in subsection 70(6) would not typically be impacted by an extension of time provided for in the will.

Author: Panourgias, Marina
Section: 70(6); 104(13.3); 104(13.4)

                                                                                                                                                                2015-060114
XXXXXXXXXX                                                                                                                                       M. Panourgias
                                                                                                                                                                (416)973-9524
April 20, 2016

Dear Mr. XXXXXXXXXX,

Re: Testamentary Spousal Trust

We are replying to your email of July 24, 2015 in which you asked whether a testamentary trust would qualify as a spousal trust if the deceased taxpayer’s will, which created the spousal trust, included language to defer the final distribution date of the spousal trust up to three years after the death of the surviving spouse.

Unless otherwise stated, all references herein to a part, section, subsection, paragraph or subparagraph is a reference to the relevant provision of the Income Tax Act, R.S.C. 1985 (5th Suppl.) c.1, as amended.

Our comments:

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced).  It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination.  The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.

Whether a spousal trust would remain in existence after the death of the spouse is a question of fact and law, which can only be determined in light of the document creating the trust.

Paragraph 70(6)(b) outlines the criteria that must be met for a trust to qualify as a spousal trust.  Generally, a provision in the deceased taxpayer’s will that provides for the deferral of the final distribution date for up to three years after the death of the surviving spouse, thus continuing the existence of the trust, should not in and of itself preclude the trust from qualifying as a spousal trust pursuant to subsection 70(6).

We hope this information is of assistance to you.

Yours truly,

Steve Fron, CA
Manager, Trust Section II
Financial Industries and Trusts Division 
Income Tax Rulings Directorate 
Legislative Policy and Regulatory Affairs Branch

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