Bare trusts have been a major focus in 2023 and 2024. Property owners, beneficiaries and tax professionals have grappled with evolving reporting expectations, while federal guidance has shifted, creating confusion about whether trustees must file T3 Trust Income Tax and Information Returns and the accompanying Schedule 15 (Beneficial Ownership Information of a Trust).
For the 2023 tax year, trustees were originally expected to file T3 returns and Schedule 15 for bare trusts. The normal filing deadline for T3 returns is March 31; in 2024 that deadline was extended to Tuesday, April 2 because it fell during Easter weekend. However, on March 28, 2024—just days before the deadline—the Department of Finance announced that bare trusts would be exempt from filing for 2023 unless the Canada Revenue Agency (CRA) specifically requests the return from a trustee or beneficiary. That late change added to uncertainty for many taxpayers and advisors.
What is a bare trust?
The Income Tax Act does not define “bare trust” explicitly, but the CRA describes a bare trust for income tax purposes as an arrangement where the trustee acts essentially as an agent for the beneficiaries with respect to all dealings in the trust’s property. In other words, the trustee holds legal title while the beneficiaries hold the beneficial interest and control over the assets.
Common examples of situations that can create a bare trust include:
- a parent who co-signs a mortgage and appears on the property title while the child is the beneficial owner;
- an adult child added as a joint owner on a parent’s bank, investment account or home for administrative or estate-planning reasons;
- a parent or grandparent who sets up a bank or investment account to hold funds on behalf of a minor.
What is a T3 Trust Income Tax and Information Return?
A T3 return is the annual tax filing required of most trusts in Canada. It reports the trust’s income, distributions to beneficiaries and any tax payable at the trust level. The return also supports related information reporting requirements, such as Schedule 15 when applicable.
What is Schedule 15?
Schedule 15 is part of the T3 filing package and collects beneficial ownership information. When a trust is required to report beneficial ownership, Schedule 15 must list identifying details for trustees, settlors, beneficiaries and controlling persons—typically name, date of birth, address and Social Insurance Number (if available)—so the CRA can establish who ultimately benefits from or controls trust property.
Do bare trusts need to file for 2024?
Draft legislation released in August 2024 proposes that bare trusts again be exempt from filing T3 returns for the 2024 tax year. The stated purpose of the exemption is to provide more time to raise awareness and to refine reporting rules so compliance is clearer and less burdensome going forward. Until the legislation is finalized and enacted, trustees should monitor official guidance and be prepared to respond if the CRA requests a filing.
What are the proposed rules for future years?
If the proposed legislative changes are enacted as drafted, the long-term framework would exempt certain bare trusts from filing based on asset value and relationship among parties:
- Bare trusts holding less than $50,000 in assets during the year would be exempt from filing, regardless of asset type.
- Where all parties to the bare trust are related persons, the exemption threshold would rise to $250,000, provided the assets consist of cash, guaranteed investment certificates (GICs), stocks, bonds, mutual funds or exchange-traded funds (ETFs).
Real estate is treated differently. The higher $250,000 limit does not automatically apply to real property, except where the property is a principal residence of one of the related legal owners—such principal residences would be exempt under the draft rules.
What this means for trustees and beneficiaries
The shifting rules mean fewer bare trusts should be required to file T3 returns in 2024 and beyond, assuming the proposed exemptions become law. However, trustees should remain attentive to official CRA requests. If the CRA specifically asks for a T3 and Schedule 15 for 2023, or for later years, trustees must respond and supply the requested information.
Because these rules can be technical and depend on the specific facts—types of assets, values during the year, and whether parties are related—consulting a professional advisor is recommended. If you normally prepare your own personal tax return, you might still consider professional help for trust filings to ensure compliance and avoid penalties.
Practical steps
- Keep accurate records of trust assets and values throughout the year.
- Document the relationship between trustees and beneficiaries to determine whether related-party thresholds apply.
- Monitor CRA guidance and check whether the Department of Finance finalizes draft legislation.
- Seek advice from an accountant or tax lawyer if you’re unsure whether a trust must file.
Understanding whether your arrangement qualifies as a bare trust and whether a T3 or Schedule 15 must be filed will protect you from unexpected compliance demands. Stay informed and consult a trusted advisor to determine the best course for your situation.
