The Assistant Chairman:—This is an appeal by Estate Henri-Charles Tétreault against the assessment of tax on property passing on the death of Henri-Charles Tétreualt.
Mr Henri-Charles Tétreault died on November 25, 1968, leaving in effect a will signed on July 30, 1947, the relevant clauses of which read as follows:
(Translation)
3. I give and bequeath to my wife, Bernadette Leduc, all my movable and immovable property of any kind, which I shall leave on my decease, constituting her my universal legatee with full power to use and dispose of all my property as she sees fit, subject notwithstanding to the conditions hereinafter stipulated.
4. On my decease my wife shall undertake the instruction, education and care of my children as was done by us both in my lifetime, instructing them as their circumstances may require and according to their inclination, even after they have attained the age of twenty-one.
5. On the decease of my wife all the property I have left her, which she has not disposed of, and all money which she has not used for her own support and to provide for all the needs of my children, as heretofore mentioned, shall revert to my children in equal shares.
The Minister refused to deduct the value of the property which the testator bequeathed to his wife from the aggregate net value of the property transferred.
Counsel for the appellant maintains that the latter should have benefited from the deduction allowed in paragraph 7(1 )(a) of the Estate Tax Act. In support of this argument counsel for the appellant contends that all the property comprised in the estate of Henri-Charles Tétreault, which passed to his wife, was vested indefeasibly in the wife for her benefit, and that the property of the deceased so transferred to his wife does not constitute a gift made by the creation of a settlement.
Alternatively, counsel contends that if the Board concluded that the property transferred to the wife of the testator constituted a gift made by the creation of a settlement, then the gift made to the wife would meet the requirements of paragraph 7(1 )(b) of the Act, and the deduction allowed by this section should accordingly be granted.
Counsel for the respondent admits that appellant’s property was vested absolutely and indefeasibly in the wife by virtue of the will of the deceased, but he contends the wife became a universal legatee by the creation of a settlement within the meaning of subsection 62(1) of the Estate Tax Act, and consequently no deduction can be made from the aggregate net value of this property under paragraph 7(1 )(a) of that Act.
The said subsection 62(1) (Revised Statutes of Canada, 1970) reads as follows:
62. (1) In this Act
“settlement” includes
(a) any trust, whether expressed in writing or otherwise, in favour of any person, and, if contained in a deed or other instrument effecting the settlement, whether or not such deed or other instrument was made for valuable consideration as between the settlor and any other person, and
(b) any deed or other instrument under or by virtue of which a usufruct or substitution is created or any real property or estate or interest therein stands limited to any persons by way of succession;
In view of that section, clauses 3 and 5 of the will of the deceased in my opinion constitute a universal legacy to the wife, a legacy which is however subject to a residual substitution in favour of the children, and will take effect on the wife’s death, which prevents her from bequeathing the residue of the property she has- received from her husband otherwise than to their children. This potential substitution prevents the Minister from granting the deductions allowed under paragraph 7(1)(a).
Subparagraph 7(1)(b)(ii) (Revised Statutes of Canada, 1970) reads as follows.
7. (1) For the purpose of computing the aggregate taxable value of the property passing on the death of a person, there may be deducted from the aggregate net value of that property computed in accordance with Division B such of the following amounts as are applicable:
(b) the value of any gift made by the deceased whether during his lifetime or by his will that can, within six months after the death of the deceased or such longer period as may be reasonable in the circumstances, be established to be absolute and indefeasible and that was made by him by the creation of a settlement under which
(ii) no person except such spouse may receive or otherwise obtain, after the death of the deceased and before the death of such spouse, any of the capital of the settlement or any use thereof, or any of the income of the settlement to which such spouse is entitled or any use thereof,
The conditions contained in clause 4 of the will, under which the wife is required by express provisions in the will to undertake the instruction, education and care of the children, are not merely a reminder to the wife to look after the care and education of the children, but are in fact, in my view, an express condition of the legacy to the wife. Although the conditionns cover the same subject matter as Article 165 of the Civil Code, they are nonetheless distinct and operative in themselves, and do not meet the requirements of subparagraph 7(1)(b)(ii), so that the deductions allowed in that section of the Act are not applicable in the case at bar.
For these reasons, I conclude that the appeal has no legal foundation and should be dismissed.
Appeal dismissed.