Mr. X died on October 20, 1991. Under the will of Mr. X, who died on October 20, 1991, he bequeathed all his property to a Spousal Trust, with the will providing that on the death of his spouse, the residue of the property of the Spousal Trust will be transferred to three Child Trusts (i.e., a trust established for the benefit of each of his three children) in equal shares. Mr. X's surviving spouse, Ms. X, died on March 1, 2010, and on April 1, 2010, the Spousal Trust distributed the remainder of its capital equally among the Child Trusts.
For the purposes of the Civil Code of Québec, a trustee’s acceptance of holding and administering an initial gift made to a trust will trigger the formation of a trust, but retroactively to the death of the settlor of the trust, if it is a testamentary trust, regardless of the date on which the trust will receive the property bequeathed to it. Accordingly, it appears that the first deemed disposition of the Child Trusts occurs 21 years after their deemed formation, namely October 20, 2012. This makes little sense, since those assets will have already been disposed of less than two years previously on the death of the beneficiary spouse, on March 1, 2010.
In confirming this result, CRA stated:
[F]or the purpose of the application of the Act, the date of creation of each of the Child Trusts would be October 20, 1991. Thus, under subparagraph 104(4)(b)(ii), the first deemed disposition date of the property of such trusts would be October 20, 2012.