As a result of a previous estate freeze, A holds the voting freeze preferred shares of Opco (which is not a small business corporation) and a discretionary family trust (“Initial Trust”), with spouse and children as beneficiaries, holds the non-voting common shares. Now a further freeze is implemented under which Initial Trust exchanges its shares for preferred shares, and New Trust, with spouse children, grandchildren and family corporations as beneficiaries, subscribes for new non-voting common shares. CRA stated:
[O]nly a person under the age of 18 who does not deal at arm's length with a trust could logically be a designated person in respect of a trust.
In light of the foregoing, Mr. A’s spouse cannot be a designated person in respect of Initial Trust.
After indicating that s. 74.4(2) nonetheless potentially might apply respecting A’s spouse viewed as a designated person in respect of A, on the basis “that the transfer of property made during this [2nd] estate freeze was made indirectly by Mr. A by means of Initial Trust,” CRA also noted:
[A]n unborn child is not a person for the purposes of section 74.4 and subsection 74.5(5) and cannot constitute a designated person under paragraph 74.5(5)(b). In contrast, from birth, a grandchild may be a designated person in respect of an individual.