| 19(1) | File No. 5-8313 |
| F. Francis | |
| (613) 957-3496 |
July 26, 1989
Dear Sirs:
Re: Trustee's Right of Offset Against Registered Retirement Savings Plans ("RRSP")
This is in reply to your letter of June 28, 1989 wherein you requested our opinion in respect of the above-captioned item.
It is our understanding that your firm, 24(1) acts as trustees of numerous RRSP's 24(1) has identified certain planholders whom it has been unable to locate for approximately 3 years. You have advised us that these planholders have nominal amounts in their RRSP accounts, have no other deposits with 24(1) and have outstanding loans with 24(1) with balances that are in excess of the balance in their RRSP accounts.
24(1) propose to exercise a trustee's right of offset and offset the annuitants' RRSP balances against their indebtedness to 24(1) You have noted that there is nothing in the Declaration of Trust for RRSPs that would deny the trustee the right of offset.
As stated in our Information Circular 70-6R dated December 18, 1978, we do not give opinions in respect of specific proposed transactions other than as a reply to an advance income tax ruling request. However, we will offer the following general comments.
We direct your attention to paragraph 146(2)(a)of the Income Tax Act (the "Act") wherein it states that the RRSP must not provide for the payment to the annuitant. It should be noted that the term "benefit" is defined under paragraph 146(1)(b) of the Act and includes any amount received out of or under a RRSP with the exception of specific exclusions described under subparagraph 146(1)(b)(i), (ii) and (iii) of the Act. Since the payment out of an RRSP to the trustee under the exercise of the right to offset would not fall within the foregoing exclusions, the payment would be considered as a payment of a benefit before maturity to a person other than the annuitant. It is therefore our view that a general right of offset in respect of the property of an RRSP would be contrary to the provisions under paragraph 146(2)(a) of the Act.
We regret that our reply could not be more favourable.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate