The Bare Trust – new guidance from CRA – RMS Estates Law

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The Bare Trust – new guidance from CRA

Raluca M. Soica
March 28, 2024

Commencing with the 2023 taxation year, the Canada Revenue Agency (“CRA”) has implemented new reporting obligations for trusts. This meant that many trusts (including bare trusts) that did not previously have to file tax returns fell under the requirement to do so.

However, acknowledging the unintended consequences these new reporting obligations have had on Canadians, the Canada Revenue Agency (CRA) has decided not to mandate bare trusts to submit a T3 Income Tax and Information Return (T3 return), along with Schedule 15 (Beneficial Ownership Information of a Trust), for the 2023 tax year, unless specifically requested by the CRA.

The concept of a “bare trust” is not explicitly defined within the provisions of the Income Tax Act. However, for tax purposes, a bare trust refers to a trust arrangement wherein the trustee effectively acts as the representative for all beneficiaries regarding all transactions involving the trust’s assets.

A trustee is deemed to act as a beneficiary’s agent when the trustee lacks significant authority or duties, cannot act without the beneficiary’s instructions, and primarily holds legal title to the assets. To establish the trustee as the agent for all beneficiaries, it is generally required for the trustee to consult and receive instructions from each beneficiary concerning all transactions involving the trust assets.

If you want to see some examples of bare trusts, click here.

If you want to read the new CRA guidance, click here.

If you want to read the original CRA guidance, click here.

If you think you may gave a bare trust scenario, our office is prepared to provide support by drafting the necessary legal documentation, such as the Declaration of Trust. Each person’s situation is different and the unique facts need to be reviewed with a legal professional to obtain a conclusive answer of whether a particular arrangement gives rise to a trust.

PLEASE NOTE THAT THE CONTENT OF THIS BLOG IS MERELY FOR INFORMATION PURPOSES AND DOES NOT CONSTITUTE LEGAL ADVICE.

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