What’s a bare trust?

It’s a specific type of trust where the trustee has no duties beyond administering the trust property as directed by the trust beneficiary or beneficiaries. Legal title of the trust property is held by the trustee, but the beneficiary is the actual owner. The trustee has no independent power over the property.¹ Bare trusts formerly had no annual tax filing obligations.

The federal government initially expanded trust reporting rules to include bare trusts starting with the 2023 tax year. But the new requirements sparked immediate confusion and push back from the tax and legal communities.

In response, the government hit pause for several years to review objections. The subsequent overhaul of the reporting framework was enacted into law with the passage of Bill C-15 March 2026 and the new rules apply to the 2026 tax year.² It’s important to determine whether you are exempt or not from bare trust reporting obligations well ahead of the 2026 tax year filing deadline.

Two common examples, among many:

• Do you have a family asset arrangement (like a joint account or property) that does not qualify for the new $50,000 or $250,000 exemptions?
• Do you manage corporate or commercial property held under a nominee corporation?

The 2023–2025 filing chaos

Under the original trust reporting rules proposed for the 2023 tax year, virtually every bare trust in Canada was required to file an annual T3 Trust Income Tax and Information Return and a new identity disclosure form known as Schedule 15. Yet tax professionals soon concluded the rules were too broad and predicted an avalanche of unnecessary documentation for tax filers and the CRA:

• As the 2023 tax season began in early 2024, many Canadians were surprised to learn that routine arrangements such as a parent co-signing a mortgage or adding an adult child to an elderly parent’s bank account qualified as bare trusts.
• Recognizing the potential for a massive administrative bottleneck, CRA announced on March 28, 2024, just days before the annual tax filing deadline, a waiver of the new bare trust requirements for 2023.
• CRA then launched a detailed review and as a result extended the waiver through the 2024 and 2025 tax years.

Objections to the original proposals

The pushback from tax professionals focused on three arguments:

1. Unintended compliance burdens: The initial rules appeared to make no distinction between a complex, multi-million-dollar offshore corporate proxy and a simple $5,000 joint bank account held by family members. Millions of Canadians faced additional accounting fees just to file and declare zero tax liability.
2. Extreme penalties: The original framework introduced significant penalties. Failing to file could trigger a gross negligence penalty equal to 5% of the highest fair market value of the property held in the bare trust. If a basic, co-signed mortgage wasn’t reported the potential fine could be many thousands of dollars.  
3. CRA overload: Tax practitioners warned the CRA that it would be hit with large volumes of unnecessary, zero-tax returns, distracting agency resources from much more critical areas, including genuine tax evasion enforcement.

The new law enacted by Bill C-15

In response, the federal government eventually introduced refined proposals which are now law through Bill C-15. Starting with the 2026 taxation year (so filed in early 2027), bare trusts are subject to a narrower reporting framework. The new law applies a formal “deemed trust” reporting definition to principal-agent arrangements while including significant, common-sense exemptions.

Note that the following is not a complete list of exemptions and seeking professional tax advice is recommended:³

• Trusts holding assets with a total fair market value that never exceeds $50,000 throughout the year are exempt.
• For simple family arrangements the reporting threshold expands up to $250,000.
• The definition of “related persons” is broadened to include aunts, uncles, nieces, and nephews. This means more intergenerational family arrangements can safely use the higher $250,000 exemption threshold.
• Spouses with a joint bank account for the use and benefit of both spouses.
• A parent that is on legal title of a principal residence with an adult child so the child can obtain a mortgage.
• Spouses that share a family home that could be designated as a principal residence but only one is on legal title.
• Bare trusts where all beneficiaries are also legal owners are exempt.
• Bare trusts that have existed for less than three months are exempt.

Why were the rules changed in the first place?

The revised rules retain the government’s original goal of increased visibility into asset ownership to facilitate global tax transparency, anti-money laundering (AML) initiatives, and tax evasion enforcement. This was driven by historical use of some bare trusts to shield the true ownership of high-value assets, particularly commercial real estate and corporate holdings. In some instances, they were used to transfer the beneficial ownership of a property while seeking to avoid land transfer taxes, capital gains tracking, and international financial sanctions.⁴ Bill C-15 seeks to close that visibility gap while sparing everyday Canadians from unnecessary bureaucratic red tape.

That said, we do recommend consulting a tax professional to clarify your own situation and the new requirements now in force.

Sources

1. https://www.canada.ca/en/revenue-agency/services/tax/trust-administrators/types-trusts.html
2. What has changed – Filing a trust’s T3 return – Canada.ca
3. Trust reporting requirements for bare trusts – what you need to know for 2025 and 2026 · Enriched Thinking® · Scotia Wealth Management
4. https://www.starkmarsh.com/bare-trusts/

Any view or opinion expressed in this piece are solely those of the Representative and do not necessarily represent those of Harbourfront Wealth Management Inc. The information contained herein was obtained from sources believed to be reliable, however accuracy is not guaranteed. The information transmitted is intended to provide general guidance on matters of interest for the personal use of the viewer, who accepts full responsibility for its use, and is not to be considered a definitive analysis of the law or factual situations of any individual or entity. Any asset classes featured in this piece are for illustration purposes only and should not be viewed as a solicitation to buy or sell. Past performance does not necessarily predict future performance, and each asset class has its own risks. As such, this content should not be used as a substitute for consultation with a professional tax or legal expert, or professional advisors. Prior to making any decision or taking any action, you should consult with a licensed professional advisor.