{"id":502,"date":"2023-01-18T10:45:09","date_gmt":"2023-01-18T10:45:09","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/lakeview-wealth-management-2\/?p=502"},"modified":"2023-04-23T16:59:16","modified_gmt":"2023-04-23T16:59:16","slug":"understanding-the-new-reporting-requirements-for-trusts","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/lakeview-wealth-management\/2023\/01\/18\/understanding-the-new-reporting-requirements-for-trusts\/","title":{"rendered":"Understanding the New Reporting Requirements for Trusts"},"content":{"rendered":"
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Download this article as a PDF<\/a>.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n

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Is your name on legal title for any assets that you don\u2019t have a beneficial interest in (i.e., a Bare Trust)? Perhaps your name is legally on your parents\u2019 home, or maybe your child\u2019s banking or investment accounts? If this is the case, you may have a new reporting obligation with the Canada Revenue Agency (\u201cCRA\u201d).<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n

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Introduction<\/h3>\n

Originally introduced in 2018, new and enhanced reporting requirements (the \u201cnew reporting requirements\u201d) are expected to be implemented for trusts that have a taxation year ending after December 30, 2023. The three main impacts of the new reporting requirements are:<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n

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  1. Certain trusts that previously had no filing obligation may now be required to file a\u00a0Trust Income Tax and Information Return<\/em>\u00a0(\u201cT3 Return\u201d) annually.<\/li>\n
  2. Additional information regarding the trust must now be disclosed on the T3 Return.<\/li>\n
  3. New and increased penalties for noncompliance.<\/li>\n<\/ol>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n
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     <\/p>\n

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    If a trust is required to file a T3 Return, it must be filed no later than 90 days after the end of the trust tax year end. For trusts with a December 31, 2023, year end, the T3 Return must be filed on or before March 30, 2024.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n

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    When do the new reporting requirements apply?<\/h3>\n

    In early November 2022, CRA announced they would be deferring the implementation of the new reporting requirements by an additional year. Trusts with a December 31 year end will be required to comply with the new reporting requirements beginning with their 2023 T3 Return.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n

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    Are there exceptions to the new reporting requirements?<\/h3>\n

    The following trusts will likely be exempt from the new reporting requirements:<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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    1. Trusts designated as Graduated Rate Estates (\u201cGRE\u201d)<\/li>\n
    2. Trusts that hold assets with a fair value of less than $50,000 throughout the taxation year.1<\/sup><\/li>\n
    3. Trusts in existence for less than 3 Months<\/li>\n
    4. Trusts that are registered plans (i.e. RRSPs\/RRIFs)<\/li>\n<\/ol>\n

      A complete list of exceptions can be found on the CRA website.2<\/sup><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n

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      1. Provided that their holdings are confined to deposits, government debt obligations and listed securities.<\/p>\n

      2.\u00a0https:\/\/www.canada.ca\/en\/revenue-agency\/programs\/about-canada-revenue-agency-cra\/federal-government-budgets\/budget-2018-equality-growth-strong-middleclass\/ reporting-requirements-trusts.html<\/a><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n

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      Bare trusts<\/h3>\n

      A point of contention within the wealth planning community is that the new reporting requirements specifically apply to what are commonly referred to as \u201cBare Trusts.\u201d A Bare Trust is a relationship whereby the Trustee holds legal title of the trust property, but the beneficiary has the beneficial ownership of the property. In other words, the trustee has no independent power or discretionary decision-making rights over the trust property, but instead, deals with the property as determined by the beneficiary. Two common examples of Bare Trusts are jointly owned investment accounts and real property ownership.<\/p>\n

      Because no formal documentation is required for a Bare Trust to exist, the new reporting requirements may uncover previously undocumented trust relationships.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n

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      Example: Bare Trust<\/h3>\n

      Brad was recently added to his mother\u2019s, May, investment account to help her with administrative tasks related to the account.<\/p>\n