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Bare trust confusion has been lingering for years. Many taxpayers wonder if this is the year they finally need to file.
The federal government first introduced bare trust legislation in 2022 with filings set to start for the 2023 tax year in 2024. Canada Revenue Agency (CRA) made a last-minute announcement that it would not require bare trusts to file for 2023 unless specifically requested. Bare trusts were ultimately not required to file for 2024 or 2025 either.
Bare trust reporting confusion is back again, but the rules are narrower. Barring another delay, certain bare trusts will have to file for 2026 by March 31, 2027.
As a refresher, a trust can be formally established through a trust deed or through someone’s will. But a trust can also exist without formal legal documentation. It is the legal relationship that matters most.
A bare trust generally involves a legal owner holding property for someone else and essentially acting as that person’s agent.
Common situations include:
A parent who merely co-signs or guarantees a mortgage but is not on title may not be holding property at all, so the first step is to determine whether there is actually a trust.
CRA’s October 2026 guidance provides clearer examples of which arrangements are caught and which are not.
Some of the exclusions and exemptions most relevant to individual taxpayers involve genuine joint ownership, certain family principal residence arrangements, trusts worth no more than $50,000, and some family trusts worth no more than $250,000 that hold only qualifying assets. Qualifying assets include cash, GICs, and certain publicly traded securities like bonds, stocks, mutual funds, and exchange traded funds.
What about spouses who have a $500,000 joint investment account? If both are legal owners and genuine beneficial owners, there is a co-ownership exclusion that may apply.
The rule requires each beneficiary to also be a legal owner, and all legal owners to also be beneficiaries. So, even though the account exceeds $250,000, it may not be subject to the bare trust reporting rules.
One spouse contributing more of the money does not necessarily mean the other spouse has no beneficial interest. There are separate attribution rules that can result in the taxation of the account differing from 50/50 in a case of unequal contributions, but that is a separate tax matter.
It may be different if one spouse is on the account only for convenience and has no beneficial interest. In that case, there may be a bare trust, and the applicable exemptions need to be considered.
Principal residences get special treatment under the new rules. One example is a parent who is on title to help an adult child qualify for a mortgage.
According to CRA, if the legal owners are related and the real estate can qualify as the principal residence of one or more legal owners, an exclusion may apply. The value of the home does not matter either, so there is no ceiling.
Be careful about trying to use this exemption for rental properties and investment properties, which should not be assumed to qualify. CRA has also been paying closer attention to taxpayers who try to get cute with the principal residence exemption.
Being on title is also different from simply guaranteeing someone else’s mortgage. A guarantor who is not on legal title may not be holding property in trust at all.
I have a lot of concerns with adding an adult child jointly to a parent’s bank account when things could otherwise be dealt with using a power of attorney or similar document.
But from a bare trust reporting perspective, suppose a parent adds their adult child to an account solely to help pay bills or manage their finances. If the child does not own or benefit from the money, this may be a bare trust rather than genuine co-ownership.
CRA gives an example of a daughter added to her father’s bank account for this purpose. When the account was worth $16,000, no return was required because an exemption applied. The same arrangement required a tax filing when the account later grew to $310,000.
Having a bare trust and having to file a tax return are not the same thing.
A reportable bare trust that does not qualify for an exemption will generally need to file a T3 Trust Income Tax and Information Return and Schedule 15. For a bare trust with a Dec. 31, 2026 year-end, the normal filing deadline is March 31, 2027.
Filing a T3 does not mean the trust suddenly pays tax on the income or capital gains from the property. Those amounts generally continue to be reported by the beneficial owner. Penalties can apply for failing to file a required return.
If someone else’s name appears on your bank account, investment account, or real estate, or your name is on one of these assets for someone else, there may be filing obligations to consider.
A bare trust does not automatically mean you have to file. Neither does being over $250,000. And being under $250,000 does not necessarily mean you are exempt. Confused yet? For what it is worth, plenty of professionals are as well.
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