New reporting requirements for in trust for accounts and jointly owned assets

Vivek Bansal
Director, Tax and Estate Planning at Mackenzie Investments

If your clients have set up a trust, knowingly or unknowingly, they could be subject to new trust reporting rules that apply for taxation years ending after December 30, 2023. These new rules could require your clients to file a T3 Income Tax and Information Return (T3 return) within 90 days of the year-end, even if there is no income or activity to report.

Under these new reporting requirements, Schedule 15 (Beneficial Ownership Information of a Trust) has been added to the T3 return that will require your clients to provide certain information for all trustees, beneficiaries (including contingent beneficiaries) and settlors of the trust. In addition, information regarding any person who can exert influence over trustee decisions regarding the allocation of income or capital would also be reportable. The information to be reported would include the name, address, date of birth (for individuals), jurisdiction of residence and taxpayer identification number (such as the Social Insurance Number for individuals and a Business Number for corporations) for each “reportable entity” that existed at any time during the year.

Certain trusts are excluded from these new reporting requirements, including:

  • Trusts that have been in existence for less than three months at the year-end.
  • Trusts that only hold certain assets (such as cash, mutual funds, or securities listed on a designated stock exchange) where the total fair market value does not exceed $50,000 throughout the year. Note: if the trust holds GICs, interest in real estate property, or shares of a private corporation then this exception would not be available, regardless of the value of trust assets.
  • Registered plans, such as DPSP, RRSP, RRIF, RPP, RDSP, RESP, TFSA and FHSA.
  • Trusts that qualify has non-profit organizations or registered charities (including internal trusts held by registered charities).
  • Mutual fund trusts, graduated rate estates and qualified disability trusts.
  • Cemetery care trust or trust governed by an eligible funeral arrangement.

If the T3 return is not filed on time, your client can be subject to penalties of $25 for each day it’s late, with a minimum penalty of $100 and maximum penalty of $2,500. An additional penalty can apply for gross negligence (if the return is not filed knowingly or false/incomplete information is provided) equal to the greater of $2,500 or 5% of the highest value of the trust property in the year.

The new reporting requirements were initially only applicable to “express” trusts, which are trusts created using the settlor’s clear written or verbal intent (as opposed to arising by operation of law). However, these rules were later expanded to include “bare trust” arrangements, which are defined under the legislation to include, “an arrangement where a trustee can reasonably be considered to act as an agent for its beneficiaries with respect to all dealings in all of the trust’s property.” Based on this expanded definition of what may be considered a trust under these rules, if your clients have arrangements where the beneficial ownership is separated from legal ownership of an account or asset, they could be treated as “bare trusts” subject to these reporting requirements.

A bare trust may exist if your clients have added their child or children onto the title of their home without transferring any beneficial interest (to simplify estate administration and minimize probate fees) or if your clients were added onto the title of their children’s house (without any beneficial interest) to help them qualify for a mortgage. Similarly, an ITF account set up by your client for their child or grandchild can be viewed as a bare trust arrangement.  

However, on March 28, 2024, the Canada Revenue Agency (CRA) announced that bare trusts would not be required to file a T3 return (including Schedule 15) for the 2023 tax year, unless the filing is directly requested by the CRA. Although this provides a welcome relief for clients that may have unknowingly created a “bare trust” arrangement, uncertainty remains around whether these rules will apply for 2024 and future tax years. As part of the announcement, CRA stated that it will work with the Department of Finance to further clarify the new reporting requirements and provide additional guidance as it becomes available. Until then, it would be important for your clients to work with their tax and legal advisors to determine if they would be subject to these onerous reporting requirements and consider evaluating whether any dormant trusts should be dissolved to minimize compliance obligations in the future.

This should not be construed as legal, tax or accounting advice. This material has been prepared for information purposes only. The tax information provided in this document is general in nature and each client should consult with their own tax advisor or accountant. We have endeavored to ensure the accuracy of the information provided at the time that it was written, however, should the information in this document be incorrect or incomplete or should the law or its interpretation change after the date of this document, the advice provided may be incorrect or inappropriate. There should be no expectation that the information will be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise. We are not responsible for errors contained in this document or to anyone who relies on the information contained in this document. Please consult your own legal and tax advisor

Meet your authors

Vivek Bansal
Director, Tax and Estate Planning at Mackenzie Investments

Vivek Bansal is a Director, Tax and Estate Planning at Mackenzie Investments. He joined the company in 2019 and has 10 years of professional experience in personal and corporate tax planning. Prior to Mackenzie, Vivek worked at a leading dealer, where he devised tax and estate planning strategies for financial advisors. He holds the Chartered Professional Accountant (CPA), Chartered Accountant (CA), and the Trust and Estate Practitioner (TEP) designation with Society of Tax and Estate Practitioners (STEP Canada). 

Vivek is also a frequent columnist for Find the repertoire his columns here:

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