If an inter vivos trust, other than a trust described in Regs. 304(1)(c)(iii)(A)(II) through (IV) purchases an annuity contract on the life of an individual beneficiary and under the contract such individual is appointed to be the payee, will that annuity contract qualify as a prescribed annuity contract (PAC) given the effect of Reg. 304(1) deeming such individual to be the holder of the annuity contract, so as to comply with Reg. 304(1)(c)(iii)(A)?
After noting that Reg. 304(3)(a) deems the annuitant under an annuity contract to be the holder of the contract where the contract is held by another person in trust for the annuitant (defined in Reg. 304(4) as a person who is entitled to receive annuity payments under the contract), CRA stated:
[U]nder paragraph 304(3)(a) of the Regulations, a parent could hold an annuity contract for their child until they attain a specific age. Paragraph 304(3)(a) … would deem the child to be the holder of the contract and, as such, would meet the requirements of clause 304(1)(c)(iii)(A) … . In our view, the expression "in trust" in paragraph 304(3)(a) … is more akin to a nominee and is not meant to include a trust not specifically referenced in clause 304(1)(c)(iii)(A), namely those identified in (ii) to (iv) above.