26 May 1998 External T.I. 9812185 - SPOUSAL TRUST AS RRIF ANNUITANT

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 Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: In teh case where a spouse is incompetent, could a spousal trust be named as the successor annuitant under the RRIF contract?

Position: No

Reasons: Law is very clear. Only spouse can be successor, not trust.

XXXXXXXXXX 981218
M. P. Sarazin

Attention: XXXXXXXXXX

May 26, 1998

Dear Sirs:

Re: Death of Annuitant and Spousal Trust as Beneficiary under RRIF

This is in reply to your letter to Ottawa Taxation Centre dated October 2, 1997, which was forwarded to our Directorate on May 11, 1998, wherein you ask whether the Department will consider a deceased annuitant's surviving spouse (who is incapable of looking after her affairs) to be the new annuitant under a registered retirement income fund ("RRIF") where a trust, established for the incompetent surviving spouse, is named as the beneficiary under the RRIF contract.

Comments

It appears that the opinion you seek relates to specific proposed transactions and, therefore, we bring to your attention Information Circular 70-6R3 dated December 30, 1996, issued by Revenue Canada. Confirmation of tax consequences with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling.

The definition of annuitant in subsection 146.3(1) of the Income Tax Act clearly provides that an annuitant under a RRIF can only be:

(a) the first individual to whom a carrier has undertaken to make payments described in the definition "retirement income fund";

(b) after the death of the first individual, a spouse of the first individual; and

(c) after the death of the surviving spouse described in (b) above, another spouse of the surviving spouse.

In its technical interpretation dated March 31, 1993 (a copy of which was faxed to you on May 21, 1998), this Directorate confirmed that a spousal trust named as the beneficiary under the RRIF contract would not result in the spousal trust becoming the annuitant under the RRIF contract. Consequently, the value of the RRIF would be included in the deceased annuitant's income at the time of his or her death.

We trust the above comments will be of assistance to you.

Yours truly,

Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch