The decedent bequeathed, to a spousal trust, insurance policies (for which he had been the policyholder and beneficiary) on the lives of his children, which had a cash surrender value and on which premiums continued to be payable. The children were the trust’s residuary beneficiaries. In finding that the payment by the spousal trust of the premiums would have the effect of tainting the trust, as its income or capital could benefit the children, CRA stated:
[T]he payment of a life insurance premium is presumed to maintain, for the period covered by the premium, the rights to receive the insurance proceeds by the beneficiary of the policy. In this case, the latter could at any time be a person other than the surviving spouse or common-law partner. Accordingly, we are of the view that the condition set out in subparagraph 70(6)(b)(ii) that no person except the surviving spouse or common-law partner may, before the death of such survivor, receive or obtain the use of any part of the income or capital of the Trust, is not satisfied.