| 902140 | |
| W.C. Harding | |
| (613)957-8953 | |
| July 16, 1991 |
Dear sirs:
Re: Interspousal Rollovers of Retirement Savings Funds on Death of Plan Members
This is in reply to your letter of September 21, 1989 concerning the above-noted topic. We apologize for the unavoidable delay in our reply which occurred as a result of an in depth examination of the issues raised.
Your queries stem from the recent Ontario High Court decision in Canadian Imperial Bank of Commerce v. Besharah, 68 O.R. (2d) 443 in which the court disregarded a beneficiary designation made in an RRSP and allowed the RRSP to fall to a deceased's estate.
We would first note that this case is one of several similar cases which have recently been heard in a number of provincial courts. In our study we noted the following cases which you may wish to examine:
1. Waugh Estate v. Waugh, (1990) 19 ACWS (3d) 47.
2. Daniel v Daniel Estate, (1986) 41 Man. R. (2d) 66.
3. Baltzan Estate v. Canada, [1990] 2 CTC 232 and
4. Bottcher Estate, (1990) 22 ACWS (3d) 117.
Our analysis of these cases indicates that the rules relating to the designation of RRSP beneficiaries lies in contract, trust or succession law or a combination of these laws; that these are all subject to provincial jurisdiction and that there is nothing within the provisions of the Income Tax Act (the "Act") which will act to override or vary the application of them. In consequence, for income tax purposes such as the application of subsections 146(8.1), (8.8) or (8.9) cognizance of any relevant provincial legislation must be taken before the sections may properly be applied.
Subsection 146(8.8) applies to include an amount in the income of a deceased annuitant of an RRSP except to the extent that the amount is receivable by the deceased's spouse. The amount so receivable may be determined through a beneficiary designation in the RRSP, under the deceased's will or in accordance with any other testamentary or intervivos document. To be effective, however, any designation must be valid and this can only be determined in accordance with the relevant provincial law.
When an amount is paid to an estate out of an RRSP, an election under 146(8.1) may be made as permitted therein. Such an election is however also subject to a validity test under provincial law.
Revenue Canada's positions with respect to the disbursement of funds out of or under an RRSP are based on the premise that the beneficial interests being satisfied through the disbursement are valid. In administering the payment of funds the onus to verify the validity of the interests and the propriety of the payments must remain with the plan administrator. In the absence of a valid claim. Revenue Canada's positions may not apply.
The cases at hand discuss beneficial interest under RRSPs and the decisions may not have relevance to the designation of beneficiaries under pensions or other forms of deferred income plans. While we have not reviewed such plans in detail, we would expect that the same considerations of provincial legislation would be necessary. We also note that life insurance policies are generally covered by specific provincial legislation, one provision of which usually allows a policy to devolve directly to a beneficiary designated in the policy.
We trust that this information is satisfactory to your needs.
Yours truly,for DirectorFinancial Industries DivisionRulings Directorate