Regarding whether a trust would satisfy the conditions of s. 73(1.01)(c)(ii) if the right of the settlor and beneficiary to demand payment of the income of the trust during the individual’s lifetime would be suspended in the event of individual’s bankruptcy, CRA stated:
[T]he phrase "is entitled to receive all of the income of the trust that arises before the individual’s death” means that the individual must be entitled to demand payment of all income of the trust in the year. Thus, [such] a clause … would not respect this condition since, during the entire period of bankruptcy, the beneficiary would not be entitled to demand payment of the income generated by the trust. The existence of such a clause in the trust deed would therefore cause the trust to fail to meet the income condition set out in subparagraph 73(1.01)(c)(ii), even if the beneficiary never became bankrupt.