The annuitant of a registered retirement savings plan ("RRSP") died, leaving his RRSP in trust for his minor child. The executor of the estate will acquire an annuity equal in value to the value of the RRSP, with a term equal to 18 years minus the age of the minor child, with the estate (a trust) as the annuitant. Under the terms of the will, the trustee could use all or part of the income or capital of the trust for the child's needs at the trustee’s sole discretion, with the capital distributed to the child at specified times. In the event of the death of the beneficiary before having received all of the trust assets, the residue would vest in the intestate heirs of the beneficiary. Thus, the minor child will not receive the annuity benefits annually, and their payment will at the trustee’s discretion.
A second Scenario varies the first in that if the beneficiary dies, the residue is distributed to another person determined by the testator.
In a third Scenario, all annuity payments would be required under the will to be paid to the child annually.
Can the minor child be considered, in these Scenarios, to have sole beneficial interest in the amounts payable under the annuity as required by s. 60(l)(ii)(B) as it was proposed to be amended [which stipulated that the annuity be one "under which the taxpayer, or a trust under which the taxpayer is the sole person beneficially interested in amounts payable under the annuity, is the annuitant …"]? CRA responded:
February 27, 2004 … Legislative Proposals … indicate … that the child will be able to benefit from the provisions of paragraph 60(l) as long as the child is the only beneficiary of the trust, before the child’s death, who has an interest in the amounts payable under the annuity.
Nowhere in the Act is the expression "amounts payable under the annuity" defined. … Pratte J.A. in Bensol Customs Brokers … explain[ed] the scope of the word “under”: "A claim is made under a statute, in my view, when that statute is the law which, assuming the claim to be well founded, would be the source of the plaintiff's right". …
Under this analysis, therefore, the annuity must be the source of the beneficiary's right to collect. … [I]t is our view that the annuities described in these Scenarios would be annuities described in clause 60(l)(ii)(B) to the extent that the Legislative Proposals are adopted.