Insights & Resources

In recent years, there’s been a lot of talk in the tax and trust community about new trust reporting rules in Canada. Starting with the 2023 tax year, most trusts have been required to provide detailed information to the CRA. This includes disclosing names, addresses, dates of birth, jurisdictions of residence, and taxpayer identification numbers for all key individuals involved with the trust—settlors, trustees, beneficiaries, and anyone who has influence over the trust.

This wave of increased disclosure requirements stirred up concern for Canadians who use bare trusts, a structure often seen in cases like in-trust accounts for minors or joint property arrangements. Bare trusts differ from other trusts because the trustee essentially acts as an agent for the beneficiaries, without exercising discretion over the trust’s assets.

This raised an important question: Would bare trusts also be subject to these new reporting rules?

Relief for 2023 Tax Year

In March 2024, the CRA offered some temporary clarity. They announced that they would not require bare trusts to file a T3 Income Tax and Information Return for the 2023 tax year unless specifically requested by the CRA. This was a relief for many Canadians, particularly those with simple bare-trust arrangements, like holding a home or financial account for a family member.

However, this left an open question: What about the 2024 tax year and beyond?

Proposed Changes for 2024 and Beyond

On August 12, 2024, the Department of Finance provided an update that shed light on the future of trust reporting rules. The government signaled its intent to amend the legislation to significantly reduce the number of bare trusts that would need to file these detailed disclosures.

As part of the proposed changes, the following administrative relief measures were announced:

1. New Exceptions for Certain Trusts: The legislation would exempt some bare trusts from filing if:

   • The trustee is an individual.
   • All beneficiaries are individuals and related to the trustee(s).
   • The total fair market value of the trust’s assets is less than $250,000 throughout the year.
   • The trust’s assets are limited to certain “excluded assets.” These include cash, publicly traded securities, mutual funds, segregated funds, GICs issued by a Canadian bank or trust company, and personal-use property.

2. New Deemed Trust Rule: Some “deemed trusts” would also benefit from exclusions, such as when the trust property is real estate used as a principal residence by related individuals or spouses.

What This Means for Bare Trusts Moving Forward

While the proposed legislation is still subject to change, the Department of Finance’s announcements signal that many simple bare-trust arrangements could be exempt from the reporting requirements in future years. If these amendments are enacted, this would ease the administrative burden for many Canadians who use bare trusts for everyday arrangements, such as holding real estate or financial accounts for family members.

It’s important to note, though, that these rules are not yet law. For now, they remain proposals, and further updates from the Department of Finance and CRA will clarify the full impact.

What Should You Do Now?

If you’re involved with a bare trust, especially one holding significant assets or involving multiple parties, it’s a good idea to stay informed about these changes. Although immediate action might not be required, staying ahead of the game could help you avoid surprises when the 2024 tax year arrives.

We’re happy to meet with you and ensure you’re prepared for any upcoming changes to the rules. We work with business professionals, executives, and families to grow and protect their wealth using our Wealth Plan formula. To discuss our approach and if it is the right fit for you, we invite you to schedule a no-obligation discovery consultation.