As a coda to my article on “trusts vs estates”, I offer the following from Chow and Pryor, Taxation of Trusts and Estates (Toronto: Carswell, 2016) at 9.2.2(c)(ii):
The residue is not ascertained until the debts and other liabilities of the deceased are determined and paid out, and the estate assets are called in and, to the extent necessary, converted into cash. This provides a window of opportunity to generate income on the assets destined for the spousal trust and use that income to pay estate liabilities and specific bequests. A personal representative who delays intentionally in a bid to extend that window of opportunity may discover that CRA closes the window on an arbitrary date selected as the date when the personal representative ought, in the judgement of CRA, to have been able to successfully ascertain the residue. This would have the effect of tainting the spousal trust if income happened to be used after that arbitrary date to pay out testamentary debts or non-spousal bequests.
