Do you hold assets in an arrangement with a separate legal and beneficial owner, where the beneficial owner oversees the assets? You may be holding a “bare trust” arrangement and subject to new reporting rules.

What is a bare trust? According to the CRA, a bare trust “exists where a person, the trustee, is merely vested with the legal title to property and has no other duty to perform or responsibilities to carry out as trustee, in relation to the property vested in the trust.”1

Here are two examples where a bare trust arrangement may exist:

  • You have been added to the property title of an elderly parent to assist with estate planning, but the parent retains beneficial ownership/control.
  • As a parent, you have added your name to the title of an adult child’s home to help the child qualify for financing.

New filing requirements. Bare trusts are now subject to reporting requirements that changed for trusts with taxation years ending after December 30, 2023. For most trusts, even if there is no income or activity to report, a T3 Trust Income Tax and Information Return must be filed within 90 days of the trust’s tax year end.

The good news is that since reporting rules were expanded to include bare trusts, the CRA will provide penalty relief if a T3 return hasn’t been filed by the deadline. This relief applies only to bare trusts for the 2023 tax year.

Seek assistance. Since the intent of the arrangement can impact whether or not it is considered a bare trust, if you believe you may be associated with a bare trust arrangement, it’s best to discuss your situation with a tax or legal expert to understand if you are subject to filing obligations. For more information:

Most recent update on Bare Trust Filings:

1. publications/p-015/treatment-bare-trusts-under-excise-tax-act.html.

Note: This is not intended to be a comprehensive or legal discussion. Please seek the advice of tax and legal experts.

Harbourfront Wealth Management was one of Wealth Professional Magazines 5 Star Brokerages for 2022. Wealth Professional is a free online information resource for all Canadian advice and planning professionals. This is not a paid award Harbourfront Wealth Management is not a sponsor.

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