Bare Trust Reporting in Canada: Do You Need to File a T3 Return?
Bare trust reporting has become one of the most confusing tax topics in Canada. Many people accidentally create bare trust arrangements without realizing it, especially with joint bank accounts, co-signed property titles, and nominee arrangements.
If you are listed as legal owner but someone else is the true beneficial owner, you may have a filing obligation.
What Is a Bare Trust?
A bare trust generally exists when:
- One person (the trustee) holds legal title to property
- Another person (the beneficiary) has full beneficial ownership and control
- The trustee acts only on instructions and has little or no independent decision power
Common real-life examples:
- Parent and adult child on joint title for convenience
- Nominee corporation holding legal title for a beneficial owner
- One family member on a bank account solely to help with bill payments
Why This Matters
Important timing note: The CRA exempted bare trusts from the new T3 filing requirement for the 2023, 2024, and 2025 taxation years. Mandatory filing for bare trusts begins for taxation years ending on or after December 31, 2026. Even where no tax is payable, an information return will be required starting in 2026. The biggest mistake is assuming “no income means no filing.”
Penalties for non-filing are steep: $25/day (up to $2,500), and gross negligence penalties can reach $2,500 or 5% of the highest FMV of trust assets.
Which Form Is Required?
If a filing obligation exists, the trust generally files:
- T3 Trust Income Tax and Information Return
- Schedule 15 (Beneficial Ownership Information)
You must disclose trustee, beneficiary, settlor, and controlling-person information depending on structure.
Are There Exemptions?
Yes. Key exemptions proposed for the 2026 tax year include:
- $50,000 small trust exemption: Trusts with total asset FMV under $50,000 throughout the year are exempt from filing
- $250,000 family exemption: Personal trusts under $250,000 holding only specific assets (cash, GICs, listed securities) where all trustees/beneficiaries are related individuals
- Express trusts only: Only trusts created by clear intent or written deed are subject to reporting. Resulting or constructive trusts (arising by operation of law) are generally excluded
Practical rule: do not rely on old advice. Confirm requirements for the specific tax year before deciding not to file.
Key Risk Areas
- Real estate held in trust or nominee structures
- Family convenience arrangements with unclear documentation
- Corporations acting as bare trustees for related parties
- No written trust agreement but facts indicate bare trust relationship
How CRA Assesses Bare Trust Situations
CRA looks at substance over form. Being on title does not automatically mean you own the property for tax purposes. CRA examines:
- Who contributed the money
- Who receives the income
- Who controls decisions (sell, refinance, rent, etc.)
- What written agreements and behavior show in practice
How to Protect Yourself
- Document beneficial ownership clearly (written declarations/agreements)
- Keep records of funding sources and account activity
- Review all nominee and joint ownership arrangements annually
- File required trust forms on time when in doubt
- Get professional advice before transferring title or adding family members to assets
Key Takeaway
Bare trust filing is an information compliance issue, not just a tax payment issue. Many taxpayers who believed they had “nothing to report” still had filing obligations. If legal and beneficial ownership are not the same, review your structure now.
Unsure whether your arrangement is a bare trust? Contact FinGems.ca for a filing-risk review.