The new enhanced trust reporting rules (\u201cnew trust rules\u201d) may catch certain Canadian trusts or informal trust arrangements considered Bare Trusts, that previously did not have to file an annual Trust Income and Tax Information Return (\u201cT3 Return\u201d). The new trust rules will force the filing of annual T3 Returns along with additional details on settlors, beneficiaries, trustees, and other controlling persons for taxation years ending after December 30, 2023.\u00a0This means that most trusts and informal trust arrangements will be subject to these new rules for their 2023 taxation years and will have to file a T3 Return no later than April 1, 2024.<\/strong><\/p>\n Because these new rules can apply to informal trust arrangements and bare trusts, Trustees of such arrangements that have never historically had any formal filing requirements may be surprised to find that first, there is a trust relationship, and second, they must now file T3 Returns for the trust. There are non-compliance penalties of $2,500 or 5% of the maximum value of the property held by the trust during the year, whichever is greater. While the Canada Revenue Agency is providing relief from these penalties for bare trusts for the 2023 taxation year only, the stakes to identify situations where a T3 Return is now required going forward are high.<\/p>\n <\/p>\n Here are four common scenarios that unexpectedly fall under the new trust reporting rules. Please, note that exceptions may apply, particularly where the value of the trust assets does not exceed $50,000 at any point in the year (the \u201c$50,000 exemption\u201d).<\/em><\/p>\n 1. Joint accounts set up for administrative or estate planning purposes.<\/strong> Where an account is held in joint name but the intention or presumption is that the account is beneficially owned by one owner, while the other is named only for administrative or estate planning purposes, a trust reporting requirement may apply.<\/p>\n 2. \u201cIn trust for\u201d accounts<\/strong>. Minors cannot generally open their own financial accounts and typically an adult family member will hold and manage the account on behalf of the minor until they reach the age of majority. If the value of the account exceeds the $50,000 exemption, the account holder must file a T3 Return. \u201cIn trust for\u201d accounts for adults would also be caught by these rules.<\/p>\n 3. Real property with an on-title owner who is not a beneficial owner.<\/b> It is not unusual in common law provinces for one or several holders of registered title to real property to be different from the beneficial owner(s) of the property. This \u201csplitting\u201d of registered and beneficial ownership can be done for privacy or ease of transferring the property, among other reasons. The title holder essentially holds the property for the benefit of the beneficial owner, creating a bare trust.<\/p>\n 4. Trusts that hold non-income producing property.<\/b> Previously, trusts were only required to file T3 Returns if they had tax payable in the year or if taxable income was allocated to beneficiaries. Under the new rules, even trusts with no income must file a T3 Return (unless an exception applies). Thus, trusts with assets that exceed $50,000 in value must now file a T3\u00a0Return, even if they do not generate any income.<\/p>\n The new trust reporting rules can apply to taxpayers in unexpected and sometimes surprising ways. Speak to your tax advisor well in advance of the T3 Returns filing deadline to determine your filing obligations and to avoid penalties.<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n","protected":false},"excerpt":{"rendered":" New Enhanced Trust Reporting Rules The new enhanced trust reporting rules (\u201cnew trust rules\u201d) may catch certain Canadian trusts or informal trust arrangements considered Bare Trusts, that previously did not have to file an annual Trust Income and Tax Information Return (\u201cT3 Return\u201d). The new trust rules will force the filing of annual T3 Returns […]<\/p>\n","protected":false},"author":189,"featured_media":4378,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_oasis_is_in_workflow":0,"_oasis_original":0,"_oasis_task_priority":"","footnotes":""},"categories":[36],"tags":[52,67],"class_list":["post-6162","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-wealth-planning","tag-estates-trusts","tag-tax-planning"],"acf":[],"yoast_head":"\nUnexpected Scenarios<\/h2>\n
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