Bare Trusts

*****Important*****

New Tax Reporting Requirements You Need To Know

1 – You have co-signed and are co-owners on a property to help another person qualify for a mortgage.

2 – Your name is on title of a property, bank account, investment account for ease of elder care, estate planning purposes and to avoid probate fees upon the death of the beneficial owner.

3 - Asset is in the name of a family member for creditor proofing.

These are just a couple of common situations (there are many) where you (Trustee) may now be required to file a T3 Trust return for 2023 and onward.  I have spent many hours this weekend reading CRA policy which is vague/complex by design to try and get clarity on this topic and ended up resorting to tax lawyers and accountants to translate into something the average person could understand.  If you have questions about your own situation, please contact your tax preparer or accountant as soon as possible. 

The situations I described above are now considered “Bare Trusts” and the details of such are now reportable to the CRA.  A T3 return must be filed annually and within 90 days after the taxation year end, failure to file will result in hefty fines.  The filing of the T3 is to clearly outline who is the Beneficial owner of the asset in question so that come time to dispose of the asset the CRA will know exactly who is to report the sale and the taxation of same.  For example,  if you have co-signed for your adult child to purchase a home and it is their primary residence, they enjoy the benefits (and risks) of owning the property, such as being entitled to income from the property, paying for its expenses or keeping the proceeds when the property is sold and your legal rights and responsibilities are limited to merely holding legal title to the property then your child is the Beneficial Owner.  The T3 Trust Return is to be filed by the Trustee, not the Beneficial Owner. 

https://www.canada.ca/en/revenue-agency/services/tax/trust-administrators/t3-return/new-trust-reporting-requirements-t3-filed-tax-years-ending-december-2023.html   CRA Policy