All About Estates

Delay in final distribution from spousal trust

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.

The Canada Revenue Agency weighed in with their comments in a recently released technical interpretation.

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) of the Income Tax Act 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).

These are positive comments from the agency and should come as a welcome relief for trustees and executors who work with documents with similar language.

Derek A. de Gannes: Senior Director, Private Client Services 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