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BE AWARE OF NEW REPORTING RULES: Are You Associated With a “Bare Trust” Arrangement?

May 27, 2024

Are you a legal owner of an asset where someone else is a beneficial owner and has a beneficial interest and oversight of the asset? I f so, you may be holding a “bare trust” and have a filing requirement where you previously did not.

Here are some examples where a bare trust arrangement may exist: • You have been added to the title of an adult child’s home in order to help your child qualify for a mortgage. • You have been added to the title of an elderly parent’s home for the sole purpose of facilitating estate planning.

In Brief: 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.”

New Reporting Requirements

Why is this important? Starting in 2023, even if there is no income or activity to report, all trusts and trust-like relationships must file a T3 Trust Income Tax and Information Return within 90 days of the trust’s tax year end. The reporting requirements have been expanded to
include bare trusts.

However, there is good news. Given that bare trust arrangements are new to these rules, the CRA will provide relief for penalties fi the T3 return has not been filed by the deadline. This relief is only applicable to bare trusts for the 2023 tax year. Certain trusts are excluded from
the reporting requirements, including those less than three months old at year end, and trusts holding certain assets with a fair market value of $50,000, as examples.

Seek Assistance

Since the intent of the arrangement can impact whether or not it is considered a bare trust, if you hold an arrangement that has as separate legal and beneficial owner, it is best to consult tax and legal experts. For more information: https://www.canada.ca/en/revenue-agency/services/tax/trust-administrators/t3-return/new-trust-reporting-requirementst3-filed-tax-years-ending-december-2023.html

1.https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/p-015/
treatment-bare-trusts-under-excise-tax-act.html

This is not intended to be a legal discussion of bare trusts. Please seek professional advice

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