2018-0787301E5 RDSP - "qualifying person"-146.4(1)

Principal Issues: Whether a person appointed under a supported decision making agreement pursuant to provincial legislation by an adult with a disability who is not contractually competent to enter into a disability savings plan is a qualifying person as defined in subsection 146.4(1).

Position: Question of Fact.

Reasons: Whether an individual is legally authorized to act on behalf of the beneficiary of a disability savings plan is a matter of law to be determined based on the laws of the province or territory in which the beneficiary resides.

Author: Schnitzer, Irina
Section: 146.4(1)

                                                                                                   2018-078730
XXXXXXXXXX                                                                           I. Schnitzer

July 10, 2019

Dear XXXXXXXXXX:

Re:   Qualifying person as defined in subsection 146.4(1) of the Income Tax Act (“Act”) (endnote 1)

This is in reply to your letter dated October 16, 2018, and our subsequent telephone conferences concerning whether a person appointed under a supported decision making agreement pursuant to provincial legislation by an adult with a disability who is not contractually competent to enter into a disability savings plan is a qualifying person as defined in subsection 146.4(1).

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 70-6R9, Advance Income Tax Rulings and Technical Interpretations.

Our comments

A “registered disability savings plan” (“RDSP”) is a “disability savings plan” that meets the conditions set out in subsection 146.4(2). The term “disability savings plan” (“DSP”) is defined in subsection 146.4(1) and includes an arrangement between a corporation that is 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 (the “issuer”) and one or more individuals or entities (the “holder”) under which contributions are to be made in trust to the issuer to be invested, used or otherwise applied by the issuer for the purpose of making payments from the arrangement to the beneficiary. The arrangement must be entered into in the year in which the beneficiary is an individual eligible for the disability tax credit.  Generally, the holder of a DSP of an adult beneficiary is either the beneficiary or if the adult beneficiary is not contractually competent to enter into a DSP, a “qualifying person”.

The expression “qualifying person” is defined in subsection 146.4(1). Pursuant to subparagraph (b) of this definition, an entity described in subparagraph (a)(ii) or (iii) of the definition can be a qualifying person if a beneficiary is of the age of majority but not contractually competent to enter into a DSP. Subparagraph (a)(ii) of this definition provides that an entity be “a guardian, tutor, curator or other individual who is legally authorized to act on behalf of the beneficiary”.

Whether an individual is legally authorized to act on behalf of the beneficiary of a DSP is a matter of law to be determined based on the laws of the province or territory in which the beneficiary resides. Consequently, we are unable to comment or provide guidance on the matter.

However, in our view, if an adult beneficiary is not contractually competent to enter into a DSP but is able to appoint pursuant to the relevant provincial or territorial legislation an individual who is legally authorized to act on behalf of the adult beneficiary, then such appointed individual would be a qualifying person pursuant to subparagraph (a)(ii) of the definition of “qualifying person” in subsection 146.4(1).

We trust that our comments will be of assistance to you.

Yours truly,

Mary Pat Baldwin, CPA, CA
Section Manager
for Division Director
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch 

ENDNOTES

1  All references herein are to the Act unless otherwise indicated.

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