Do you have a bare trust arrangement and a CRA filing requirement? Bare trust arrangements are present in common everyday activities. It is important to be aware of and understand whether you have filing requirements to avoid harsh CRA penalties.

Bare trusts may now be required to file a T3 and Schedule 15 with the CRA for the tax year ending December 31, 2026. With the enactment of Bill C-15 the Government of Canada has come out with new reporting requirements revolving around bare trust agreements. Historically bare trusts have been exempted from T3 and Schedule 15 reporting requirements. These changes will affect many Canadian individuals and corporations who have never filed trust returns previously

To find out if you or your corporation is affected by these new reporting requirements please read:

These new trust reporting rules may apply to you if:
   1. Your name has been added to your adult parent/elderly parents bank account, investment account, or mutual funds,
   2. If your adult parent is added on a deed/mortgage to obtain financing/mortgage,
   3. If you have added your adult child’s name to a deed to avoid probate tax,
   4. If you have a bank account, investment account or mutual fund set up for your minor child
   5. You open a bank account for your corporation in your name,
   6. Your corporation is on the title of personal real estate, vehicle or other assets, or vice-versa,
   7. You have a cost sharing arrangement, joint venture arrangement or a partnership where an individual holds the bank account or other assets while having no, or partial beneficial interest in the assets.

If any of these situations apply to you, a bare trust arrangement likely exists, and therefore filing a T3 and a Schedule 15 might be required. Please read below for further guidance. With any new legislation, interpretation can be ambiguous, we request you consult your advisor before acting on this information. These new reporting requirements will impact your 2026 trust returns. We will assist you to ensure that your return meets all requirements, and we may contact you to obtain additional information before the filing deadline of March 31, 2027.

A bare trust is an arrangement under which the trustee can reasonably be considered to act as an agent, acting strictly on the instructions of the beneficial owner, for all beneficiaries under the trust with respect to all dealings with all of the trust’s property. The legal title of the property remains with the trustee, but the beneficiary has all the beneficial ownership of the property. 

Various example of bare trust arrangements are as follows:
   1. Parent’s name is added on a deed/mortgage for financing purposes: It could also be someone other than a parent, but parent is the most common arrangement. In this example, legal ownership remains with the trustee (the parent), but tax ownership is with the beneficiaries (the child). Tax owed to the CRA from income and/or capital gains would accrue to the child.
   2. Pre-Emptive Tax Planning: having the child’s name on the parent’s deed prior to avoid probate. By adding the adult child’s name on the parent’s deed, It adds the child on the legal title, which in turn creates a bare trust arrangement.
   3. Adult Parents add child’s name to bank accounts, investment accounts, mutual funds: This would result in a bare trust arrangement. If multiple bank accounts with the same adult parent and child names are listed, only one bare trust arrangement exists that involves multiple bank accounts. Even if the parent is reporting income earned, the trust arrangement still exists.
   4. Adult Parents have a joint bank account, investment account, mutual funds set up or funds held for a minor child: Likely that these funds earn income that is reported from T3s that say ITF (In trust for). Parents likely have sole signing authority. Funds typically would come from gifts deposited to the child’s bank account. Under this arrangement, it is likely the minor child has no say, or understanding of how the funds are invested, spent, etc. and therefore the parent has full control of the funds. This presents a bare trust arrangement.
   5. Shareholder opens a bank account in their name for their corporation: This would result in a bare trust arrangement as the shareholder holds legal ownership over the account while the corporation is the beneficial owner of the account. The shareholder has no beneficial interest in the account and any income earned on the funds would generally be attributed to the corporation.
   6. Cost sharing arrangements and partnerships: This may result in a bare trust arrangement when one individual, or a few, holds ownership over assets that are for beneficial use of all participants. In this situations even though one person holds the property, any income or gains would be attributable to all beneficiaries thus creating a bare trust arrangement.

Just because you have an arrangement that constitutes a bare trust does not automatically mean that you must file a T3 and a schedule 15. Some common exceptions include:
   - Co-ownership: if each beneficiary at any time of the year was also the legal owner of the property and all legal owners are beneficiaries. An example of this would be a joint bank account between spouses.
   - Family-owned principal residence: If all legal owners were related individuals and the property could be designated as the principal residence for one or more owners in the year. An example of this would be if a parent or an aunt/uncle co-signs a house with their child or niece/nephew.
   - Partnership Property: The property was held solely for the use or benefit of a partnership, each legal owner was a partner of the partnership, and a partnership information return (T5013) was required.
   - Temporary Trust: Trusts that have existed for less than 3 months.
   - De Minus Trusts: Trust that have a fair market value of assets that do not exceed $50,000 at any time in the year.
   - Small Family Trusts with Qualifying assets: you must meet the following criteria:
      o Each beneficiary is an individual and is related to each trustee;
      o The total fair market value of the trust does not exceed $250,000 at any time in the year;
      o Only specific assets: cash, publicly traded stocks, personal-use property, were held in the trust throughout the year.
   - Registered Trust accounts: These include accounts such as a RRSP, RRIF, RESP, TFSA, FHSA.

It’s important to note that we cannot cover all possible exemptions in this article. Even if you do not meet any of the exemptions listed above you still may be exempt. Always reach out to a qualified professional if you are unsure whether or not you need to file.

T3 Trust Returns
If you would like to engage us to prepare your T3 return, please see the bare trust intake form. The information we would need to file your T3 return is:
   - Name of trust:
      o Where there is no name documented, CRA suggests using the legal names of all beneficiaries followed but the word “Trust” should be used.
   - Name of trustee(s)
   - Name of settlor(s)
   - Name of beneficiaries

Schedule 15
The additional information required to be reported on the T3 return on Schedule 15 for all trustee(s), beneficiaries and settlor(s) is as follows:
   - Name
   - Type of classification (individual, corporation, trust)
   - Address
   - Date of birth (if an individual)
   - Country of residence
   - Taxpayer identification number, i.e. SIN, trust account number, business number

A trust is deemed to have met these new filing requirements when the information indicated above has been provided for each reportable entity whose identity is known or ascertainable, with reasonable effort at the time of filing. For those whose identity is now known or ascertainable, a trust can comply by supplying sufficiently detailed information on the T3 return to determine whether a person is beneficiary. All of this information must be gathered for the first year of filing and reported to the CRA. For the following years, modifications to this information will be necessary as required, such as changes to legal names, addresses, identification of new beneficiaries, etc.
 

If you are required to file a T3 Trust return, it will be due no later than 90 days after the trusts tax year-end. For bare trusts the tax year is the same as the calendar year end. Meaning you must file your trust return no later than March 31 of the following year.

If you do not file before March 31st, there is a $25 per day penalty with a minimum penalty of $100 and a maximum penalty of $2,500. If the CRA assesses that a person knowingly failed to comply with the new reporting requirements there will be a penalty equal to the greater of $2,500 or 5% of the greatest FMV of all property held by the trust during that time.

Settlor: anyone who has contributed cash, property, assets to the trust at any time during the trust’s life.
Trustee(s): an individual(s) or trust institution that holds legal title to property in trust for the benefit of the trust beneficiaries.
Beneficiary: includes the person(s) for whose benefit the trust is created, therefore the person(s) who has beneficial ownership.

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