Mr. X’s TFSA formed part of the residue of his estate which, as such, was bequeathed by the terms of his will to a spousal trust, with a lump sum capital payment of $100,000 per year to the beneficiary, Ms. X. Shortly after Mr. X's death, the executor liquidated the TFSA and transferred its value of $100,000, to the spousal trust. Subsequently, a payment of $100,000, representing the value of the TFSA, was made by the trustee to Ms. X prior to the end of the rollover period, by way of a distribution of capital from the spousal trust.
Does such payment from the TFSA to the surviving spouse by way of a capital distribution from the spousal trust satisfy para. (b) of the definition of "exempt contribution"? In responding, CRA first noted:
Given the words "directly or indirectly", a particular payment will qualify as a payment to the survivor whether the money is paid directly to the survivor under the TFSA or whether it is first paid to the executor of the estate and the trustee of the spousal trust before being paid by the latter to the survivor.
Since s. 248(8)(a) provided that a transfer, distribution or acquisition of property made under or as a consequence of the terms of a taxpayer’s will is to be considered to be a transfer etc. as a consequence of the taxpayer’s death, CRA was generally of the view that the payment was made as a consequence of the individual's death. CRA then stated:
Where amounts from a deceased holder's TFSA are first paid to the executor of the deceased holder's estate and then paid by the executor to the survivor, it is generally the CRA's view that the payment to the survivor is equal to the amounts paid out of the TFSA to the deceased holder's estate, to the extent that the survivor is entitled to the TFSA under the deceased holder's will, and the survivor receives an equivalent or greater amount from the estate as a consequence of the death of the deceased owner.
The same reasoning applies where amounts from the TFSA are paid by the executor of the estate to a spousal trust before being paid to the surviving spouse. Thus, the fact that the will provides for the payment of the residue of the deceased holder's property, including the TFSA, to a spousal trust would not, in and of itself, preclude the surviving spouse from receiving a survivor payment within the meaning of paragraph (b) of the Definition, provided that the spousal trust pays the surviving spouse an equivalent or greater amount during the rollover period. A lump sum payment from such a trust is deemed to be made as a consequence of the death of the deceased holder for the purposes of the Definition, provided that such payment is made in accordance with the terms of the will.