Trust Reporting
As of March 28, 2024 CRA has waived the requirement to file a bare trust return for the 2023 tax year and is working to clarify the reporting requirements for 2024 and beyond. There has been no indication as to when the new requirements will be announced.
The rules prior to the March 28, 2024 announcement were as follows:
Two new far-reaching filing requirements have been passed into law this year. The new filing requirements are Trust returns for bare trust arrangements (the filing deadline is April 2, 2024) and Mandatory Disclosure Reporting (the filing deadline is 90 days after the arrangement or contract has been entered into).
Please review these new filing requirements carefully and inform us if they apply to you. Trust returns for bare trust arrangements below and Mandatory Disclosure Reporting here.
Trust Reporting
Effective December 30, 2023, a T3 trust return must be filed in situations where a bare trust arrangement exists.
A bare trust is a situation where the legal title of the trust property is held by one person (the trustee), but another person (the beneficiary) has the beneficial ownership of the property and receives the income from the property. The beneficiary has sole responsibility for the property, how it is managed, and decides when and if it is to be sold. The trustee has no obligation other than to deal with the trust property as instructed by the beneficiary.
Bare trusts are commonly used to:
ensure privacy and maintain the anonymity of the true owner of a property when the ownership information, such as land registration records, are public record
minimize provincial land transfer taxes or probate fees when the beneficiary passes away
gift a minor child or children with property who cannot hold a legal title
hold legal title of a property on behalf of a group of owners in a joint venture or partnership
facilitate efficient property transfer in corporate reorganizations where the legal ownership of property may otherwise need to be transferred and registered multiple times, or if the legal ownership cannot be transferred at the desired time due to administrative issues.
Examples of bare trust arrangements, when a T3 trust return must be filed, are:
Cash and investments
A parent, grandparent, or other person has a bank or investment account holding liquid assets (such as deposits, government debt obligations, and listed securities) that total $50,000 or more at any time in the calendar year in trust for a child or someone else. The child is entitled to the income from the account and all the proceeds from the sale of the investment. A bare trust arrangement is in place and a trust return must be filed.
Registered trust accounts like RDSPs, RESPs, RRIFs, RRSPs, TFSAs, employee profit-sharing plans, registered supplementary unemployment benefit plans, or first home savings accounts are all exempt from a T3 trust reporting requirement.
A parent adds a child to their bank or investment account and/or holding liquid assets (such as deposits, government debt obligations, and listed securities) that total $50,000 or more at any time in the calendar year. The parent is entitled to all the money in the account, and any interest earned in the account and makes the decision as to when the asset is sold. A bare trust arrangement exists as the child is holding the bank account for their parent and a trust return must be filed.
Land
A parent adds the name of a child on a quarter of the land that the parent owns. The parent is the beneficial owner of the quarter of the land, receives all the income, makes the decision if it is to be sold, and receives all the proceeds if it is sold. This is a bare trust arrangement as the child is holding the title on behalf of the parent and a trust return must be filed.
Property
Dad and Mom guarantee the mortgage for their child’s house and all three names are on the title of the house. The child lives in the house, makes the decision if it is to be sold, and receives all the proceeds if it is sold. This is a bare trust arrangement as Mom and Dad are holding the title on behalf of the child and a trust return must be filed. Because it is a trust arrangement, an Underused Housing Tax form must be filed as well.
Grandparents guarantee a loan for a grandchild to purchase a duplex investment property. The grandparents' names are on the title of the property but, the grandchild receives all the benefits from the property, decides if it is to be sold, and receives all the proceeds if it is sold. This is a bare trust arrangement as the grandparents are holding the title on behalf of the grandchild and a trust return must be filed. Because it is deemed to be a trust arrangement, an Underused Housing Tax form must be filed as well. If the property had 4 or more residential units, an Underused Housing Tax form would not have to be filed.
Examples of when a bare trust arrangement does not exist, and a trust return does not have to be filed.
Cash and investments
A parent, grandparent, or other person has a bank or investment account holding liquid assets (such as deposits, government debt obligations, and listed securities) that total $49,999 or less at all times in the calendar year in trust for a child or someone.
Land
A parent adds the name of a child on their quarter of land. The parent and the child are the beneficial owners of the quarter of the land, share the income, make the decision if it is to be sold together, and share the proceeds if it is sold.
Property
Dad and Mom guarantee the mortgage for their child’s house, but Dad and Mom’s names are not on the title of the house. The child lives in the house, makes the decision if it is to be sold, and receives all the proceeds if it is sold.
Dad and Mom guarantee the mortgage for their child’s house and all three names are on the title of the house. The child lives in the house, the parents pay ½ the mortgage, they jointly make the decision if the house is to be sold and they split the proceeds if the house is sold. All parties have beneficial ownership so a trust arrangement does not exist.
Grandparents guarantee a loan for a grandchild to purchase a duplex investment property. Grandparents' names are not on the title of the property. The grandchild receives all the benefits from the property, decides if it is to be sold, and receives all the proceeds if it is sold.
Grandparents guarantee a loan for a grandchild to purchase a duplex investment property. The grandparents' names are on the title of the property. The grandchild receives the rent and pays all the expenses but at the end of the year, they split the profit with their grandparents. The grandparents and grandchild decide together if the property is to be sold and the proceeds are split if it is sold.
All trusts have a December 31 yearend unless the trust is a testamentary trust from the death of an individual. As a consequence of these new rules, a T3 trust return must be filed for the year ended December 31, 2023, by April 2, 2024, and for every year thereafter as long as the trust arrangement is still in existence at any time in the calendar year. If a trust is wound up during the calendar year, a trust return must still be filed for that calendar year. A new Schedule 15 requires the names, SIN, date of birth, address, and country of residence of the trustees, settlor, and beneficiaries to be reported.
