All About Estates

Spousal trust and life insurance

The Canada Revenue Agency (CRA) had an opportunity expand on their position as it applies to a trustee’s duty to maintain certain income producing or capital appreciating properties which may potentially benefit a spouse during their lifetime. The CRA answer was delivered in a technical interpretation.

The question posed to the CRA was whether a trustee’s duty to maintain certain income producing or capital appreciating properties which may potentially benefit a spouse during their lifetime was analogous to the payment of insurance premiums by the trustee to maintain rights to receive the insurance proceeds by the policy beneficiary after the death of the spouse.

In their view, the CRA still take the position that a trustee’s duty to maintain certain income producing or capital appreciating properties which may potentially benefit a spouse during their lifetime, is not, analogous to the payment of insurance premiums by the trustee to maintain rights to receive the insurance proceeds by the policy beneficiary after the death of the spouse. The basis for the CRA position is they consider the payment of premiums by the trust to be property used to establish the residual beneficiaries’ rights to funds from the policy that will be realized after the death of the spouse.

Trustee(s) need to be aware of these rules so as to not disqualify spousal trusts and lose access to the related favourable tax rules.

About Derek de Gannes
Derek A. de Gannes: Director, Domestic & International Tax of RSM Canada. RSM Canada is committed to the highest level of integrity, quality and professionalism and provides clients with solutions in the area of Audit, Tax and Transaction Services. Email: derek.degannes@rsmcanada.com