Principal Issues: What is the meaning of "named" in the definition of QDT in subsection 122(3)?
Position: Ordinary meaning of the word named which is that the beneficiary of the testamentary trust is identified by his/her name in the instrument under which the trust is created.
Reasons: Textual, contextual, and purpose interpretation of paragraph 122(3)(b).
TAXATION OF FINANCIAL STRATEGIES AND INSTRUMENTS ROUNDTABLE, OCTOBER 7, 2016
2016 APFF CONFERENCE
Question 6
Qualified Disability Trust ("QDT")
Under the definition of "qualified disability trust " in subsection 122(3), paragraph (b) requires that each beneficiary is an individual, named as a beneficiary by the particular individual in the instrument under which the trust was created, and that the facts set out in subparagraphs (i) and (ii) are complied with.
If a will refers to the testator's children or descendants as beneficiaries of a testamentary trust, does this mean that if a child becomes eligible for the federal disability tax credit, he or she will not be able to access the benefits of a qualified disability trust because he or she is not specifically named in the will? If the person is required to be named by name, it causes a problem if the person was not born at the time of the making of the will or becomes disabled in the future.
Question to CRA
For the purposes of the definition of QDT, does named mean designated by name or could a person within a class of beneficiaries be considered to be named under the will?
CRA response
To be a QDT as defined in subsection 122(3) for a taxation year, one of the conditions provided in paragraph (b) is that each of the beneficiaries who has elected under clause (a)(iii) (A) is an individual who is named as a beneficiary by the deceased individual, in the instrument under which the trust was created.
The term "named" in paragraph (b) of the definition of QDT in subsection 122(3) means a beneficiary who is identified by his or her name. This term refers to a beneficiary whose name is specifically stated in the instrument under which the trust was created.
Consequently, a beneficiary who is part of a class of persons described in the instrument under which the testamentary trust has been established, such as children or descendants of the deceased individual, as well as a beneficiary who is unborn, would not be considered as a named beneficiary for the purposes of paragraph (b) of the definition of QDT in subsection 122(3).
Lucie Allaire
October 7, 2016
2016-065174