How Canada's 2025 Trust Rules Could Affect You

Note:

Filing for 2025: The CRA's exemption for bare trusts only officially covers the 2023 and 2024 tax years. As of now, there has been no official announcement extending the exemption to the 2025 tax year.

If the CRA does not issue a new exemption for 2025, then bare trusts will be required to file a T3 Income Tax and Information Return, including Schedule 15, for the 2025 tax year (due 90 days after the end of the trust’s tax year, likely March 31, 2026).

There's been a lot of talk around new tax filing requirements concerning trusts. So, how's it all shaking out? Let's get right into it.

For the 2024 tax year, the Canada Revenue Agency (CRA) will not require bare trusts—arrangements in which one person holds assets on behalf of another, such as a shared bank account with a parent or child—to file a T3 Income Tax and Information Return (T3 Trust Return). This ruling continues the 2023 filing exemption for bare trust reporting requirements.

For most other types of trusts, filing a T3 Trust Return annually—including details about the beneficial owners—is typically required. While rules continue to evolve, follow this primer on trusts and how to manage them for tax purposes.

What is a trust?

A trust is a legal arrangement where one party (the trustee) holds assets on behalf of another party (the beneficiary). Trusts are commonly used for estate planning, asset protection, and tax planning.

A family trust set up by parents to hold and manage investments for their children is a good example of a trust that is not a bare trust. The parents (trustees) control the assets and decide when and how to distribute the income or investments to the children (beneficiaries). Trusts like this must file a T3 Trust Return if they earn income, sell property with a taxable capital gain, distribute money or assets, or if the CRA specifically requests a filing.

What is a bare trust?

A bare trust is a simple type of trust where the trustee has no control over the assets—they are held strictly for the beneficiary, who has full ownership rights. Unlike traditional trusts, a bare trust does not have formal trust documents outlining duties or conditions.

For example, Joanne has her name on her daughter’s savings account, but she never uses the money—it all belongs to her daughter. Joanne is just there to help with banking, but she’s not the true owner of the funds. That’s a bare trust.

Or imagine that Uncle Ray holds the title to a condo for his nephew, Jake, because Jake isn’t ready to manage it himself. Even though Ray’s name is on the paperwork, the condo really belongs to Jake. That, too, could be considered a bare trust by the CRA.

Could you have an unknown bare trust?

Many Canadians may unknowingly have a bare trust. You might be in this situation if:

• You co-own a joint bank account with a parent or child but don’t contribute or use the funds (more on this below).
• Your name is on a property deed for someone else’s benefit
• You are listed on an investment account but do not actually control or benefit from the assets

While new trust reporting rules originally planned for these arrangements to require a T3 Return, the CRA has now exempted bare trusts from filing for 2023 and 2024 unless specifically requested.

What are the new trust rules?

As of October 29, 2024, the CRA announced that bare trusts are exempt from filing a T3 Return, including Schedule 15 (Beneficial Ownership Information of a Trust), for both the 2023 and 2024 tax years unless the CRA specifically requests these filings.

While some trusts are now required to file T3 Returns, the requirement for bare trusts had unintended impacts for Canadians, particularly for those with joint bank accounts, nominee arrangements, or informal trust setups. Many individuals and businesses were caught off guard, facing unexpected filing obligations, potential penalties, and increased administrative work. The CRA has acknowledged these challenges and will provide further clarification in the future.

The changes

• More trusts need to file: Many trusts that didn’t have to file before will now need to file. If a trust earns income, sells property, or distributes money to beneficiaries, for instance, it likely needs to file a T3 Return. For example, if a family trust sells a cottage or pays out investment income to a beneficiary, it must report this to the CRA.
• More information required: Affected trusts must now disclose details about the people and assets involved. This includes the names and addresses of trustees (who manage the trust), beneficiaries (who receive benefits), and settlors (who created the trust), as well as information about the trust’s assets. For example, if a trust owns an investment portfolio, it must report what it holds and who benefits from it.

Filing deadlines and penalties

• Trusts that need to file must submit their T3 Return within 90 days after the end of the trust's tax year. For example, a trust with a 2024 tax year ending on December 31 must file its return by March 31, 2025.
• Penalties start at $25 per day (with a minimum of $100, up to $2,500).
• In cases of serious negligence, fines could be as much as 5% of the trust’s total value.

Are joint accounts considered a bare trust?

A common question is whether joint bank accounts qualify as bare trusts. The answer depends on who controls the funds and how the account is used.

When a joint account is a bare trust

A joint account may be considered a bare trust if one person is listed on the account but does not use or benefit from the money. For example:

• A parent is added to a child’s bank account for convenience but doesn’t contribute or withdraw funds.
• An adult child helps an elderly parent manage their account, but the parent remains the true owner.
• A relative holds funds for someone else’s benefit without using the money themselves.

If the CRA determines your joint account is a bare trust, you may need to file a T3 Return in the future.

When a joint account is not a bare trust

A joint account is not a bare trust if:

• all account holders contribute and use the funds
• the account is shared equally between both parties, and both are considered owners

Bare trust exemptions

For now, bare trusts are exempt from filing requirements unless the CRA specifically requests that the trustee files. If you’re unsure whether your joint account qualifies as a bare trust, it’s a good idea to consult a TurboTax expert to determine if you need to file a T3 Return.

What if the CRA says I have a bare trust?

If your joint bank account or other financial arrangement qualifies as a bare trust, you may not need to file a T3 Trust Return because bare trusts are currently exempt from filing requirements for the 2023 and 2024 tax years. But the CRA does reserve the right to specifically request a filing if they feel necessary or you may have other types of trusts that require it. If so, here's how to do it:

How to file a T3 Trust Return

1. Obtain the correct forms. Download Form T3RET (T3 Trust Income Tax and Information Return) from the CRA website.
2. Gather necessary details. You’ll need information about the trustee(s), beneficiary(ies), and assets held in trust.
3. Complete the return. Report any income, capital gains, or distributions. Even if there’s no income, you may still need to file for reporting purposes.
4. File on time. The T3 Return is due 90 days after the end of the trust’s tax year.

Where to file a T3 Return

You can submit your T3 Return electronically or by mail.

• Online: Use CRA’s EFILE or NETFILE systems (if eligible).
• By mail: Send the completed return to the designated CRA processing centre.

Penalties for not filing

If you’re required to file a T3 Return and miss the deadline, penalties can start at $25 per day (up to $2,500). In cases of gross negligence, additional penalties may apply. However, the CRA is offering relief for T3 Trust filers until May 1, 2025, for the 2024 tax year. This means no late-filing penalties or interest will be charged during this period, giving taxpayers more time to meet their filing obligations, especially those reporting capital property sales.

Stay informed and compliant on new trust rules

Bare trusts are currently exempt from filing for the 2023 and 2024 tax years, but it's important to stay updated as the CRA clarifies the requirements. If you hold a joint account or financial arrangement that could qualify as a trust, consult a Canadian tax professional to understand your filing obligations. Taking the right steps now can help you avoid penalties and ensure compliance with CRA rules.

With changing tax rules, some tax years can be more confusing than others.

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