Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Meaning of lifetime benefit trust

• 60.011 (1) For the purpose of subsection (2), a trust is at any particular time a lifetime benefit trust with respect to a taxpayer and the estate of a deceased individual if

  • (a) immediately before the death of the deceased individual, the taxpayer

    • (i) was both a spouse or common-law partner of the deceased individual and mentally infirm, or

    • (ii) was both a child or grandchild of the deceased individual and dependent on the deceased individual for support because of mental infirmity; and

  • (b) the trust is, at the particular time, a personal trust under which

    • (i) no person other than the taxpayer may receive or otherwise obtain the use of, during the taxpayer’s lifetime, any of the income or capital of the trust, and

    • (ii) the trustees

      • (A) are empowered to pay amounts from the trust to the taxpayer, and

      • (B) are required — in determining whether to pay, or not to pay, an amount to the taxpayer — to consider the needs of the taxpayer including, without limiting the generality of the foregoing, the comfort, care and maintenance of the taxpayer.

• Meaning of qualifying trust annuity

  (2) Each of the following is a qualifying trust annuity with respect to a taxpayer:

  • (a) an annuity that meets the following conditions:

    • (i) it is acquired after 2005,

    • (ii) the annuitant under it is a trust that is, at the time the annuity is acquired, a lifetime benefit trust with respect to the taxpayer and the estate of a deceased individual,

    • (iii) it is for the life of the taxpayer (with or without a guaranteed period), or for a fixed term equal to 90 years minus the age in whole years of the taxpayer at the time it is acquired, and

    • (iv) if it is with a guaranteed period or for a fixed term, it requires that, in the event of the death of the taxpayer during the guaranteed period or fixed term, any amounts that would otherwise be payable after the death of the taxpayer be commuted into a single payment;

  • (b) an annuity that meets the following conditions:

    • (i) it is acquired after 1988,

    • (ii) the annuitant under it is a trust under which the taxpayer is the sole person beneficially interested (determined without regard to any right of a person to receive an amount from the trust only on or after the death of the taxpayer) in amounts payable under the annuity,

    • (iii) it is for a fixed term not exceeding 18 years minus the age in whole years of the taxpayer at the time it is acquired, and

    • (iv) if it is acquired after 2005, it requires that, in the event of the death of the taxpayer during the fixed term, any amounts that would otherwise be payable after the death of the taxpayer be commuted into a single payment; and

  • (c) an annuity that meets the following conditions:

    • (i) it is acquired

      • (A) after 2000 and before 2005 at a time at which the taxpayer was mentally or physically infirm, or

      • (B) in 2005 at a time at which the taxpayer was mentally infirm,

    • (ii) the annuitant under it is a trust under which the taxpayer is the sole person beneficially interested (determined without regard to any right of a person to receive an amount from the trust only on or after the death of the taxpayer) in amounts payable under the annuity, and

    • (iii) it is for the life of the taxpayer (with or without a guaranteed period), or for a fixed term equal to 90 years minus the age in whole years of the taxpayer at the time it is acquired.

• Application of paragraph 60(l) to qualifying trust annuity

  (3) For the purpose of paragraph 60(l),

  • (a) in determining if a qualifying trust annuity with respect to a taxpayer is an annuity described in subparagraph 60(l)(ii), clauses 60(l)(ii)(A) and (B) are to be read without regard to their requirement that the taxpayer be the annuitant under the annuity; and

  • (b) if an amount paid to acquire a qualifying trust annuity with respect to a taxpayer would, if this Act were read without reference to this subsection, not be considered to have been paid by or on behalf of the taxpayer, the amount is deemed to have been paid on behalf of the taxpayer where

    • (i) it is paid

      • (A) by the estate of a deceased individual who was, immediately before death,

        • (I) a spouse or common-law partner of the taxpayer, or

        • (II) a parent or grandparent of the taxpayer on whom the taxpayer was dependent for support, or

      • (B) by the trust that is the annuitant under the qualifying trust annuity, and

    • (ii) it would, if it had been paid by the taxpayer, be deductible under paragraph 60(l) in computing the taxpayer’s income for a taxation year and the taxpayer elects, in the taxpayer’s return of income under this Part for that taxation year, to have this paragraph apply to the amount.