A discretionary inter vivos family trust (the “Old Trust”), which was approaching its 21st anniversary and originally had been settled by a non-family individual, had provisions in its declaration of trust which contemplated that, prior to that anniversary, the trustee would make an irrevocable declaration establishing the respective shares to the trust fund of the family beneficiaries, so that the trust fund would be distributed to those beneficiaries except those who were “designated persons” (i.e., grandchildren who were minors), whose respective shares as so determined would be held for them until they attained the age of majority. In order to address “ambiguities” in the declaration of trust for Old Trust, a judgment was obtained from the Quebec Superior Court declaring that the ambiguities were resolved as sought by the trustee. All the assets of the Old Trust were transferred to a new trust (“New Trust” – also settled by a non-family individual), whose terms were “for all practical purposes” the same as for the Old Trust but “adjusted to take into account the conclusions of the declaratory judgment rendered.” An “irrevocable determination” by the trustee was defined as (TaxInterpretations translation):
an absolute right of a beneficiary to receive property or an amount or part or all of the income and/or capital of the Trust…in such a manner that his or her right cannot be diminished or otherwise modified by a future event, even if the beneficiary cannot immediately enjoy or receive all the benefits arising thereunder
A determination of the trustee as to the beenficiaries’ shares was deemed under the New Trust terms to become irrevocable immediately before the 21st anniversary of the Old Trust (or on him ceasing to be a trustee, if sooner).
CRA ruled that the trust-to-trust transfer was deemed not to be a disposition under the exception in para. (f) of the s. 248(1) disposition definition (and so that s. 248(25.1) deemed the new trust to be a continuation of the old), and that s. 104(5.8) applied to the transfer (so that the New Trust was subject to the 21st anniversary date of the Old Trust), and also provided an opinion (having regard to distributions to the minor grandchildren being deferred after that date) that, provided that the exceptions in subparas. (g)(iii), (iv) and (vi) of s. 108(1) – trust did not apply, s. 104(4) would not apply by virtue of the exception in para. (g).