New Trust Reporting Requirements

Good afternoon:

You may have already heard about the new Trust reporting requirements that have been in the news recently.  You may have a trust relationship which you may not be aware of, and these trust returns are due by March 30, 2024. 

Please click on this link for details: https://www.canada.ca/en/revenue-agency/services/tax/trust-administrators/t3-return/new-trust-reporting-requirements-t3-filed-tax-years-ending-december-2023.html It is important that you review this information as the onus is now on you to determine if you have a reporting requirement.

1. Bare Trusts (flow chart below)

Below are some examples that may be a “bare trust” arrangement and have a requirement to file:

• Parent co-signs on a loan for child (home, vehicle, etc.), the parent being a legal owner and the child being the beneficial owner
• Child is put on parent’s title for estate purposes, the child being a legal owner but the parent is the beneficial owner (bank/investments, house, farm land, etc.)
• Bank/investment accounts held in trust for a child/grandchild – note, this may be exempt for filing if certain conditions are met.  See Point 2.3b on the link above if you are required to file.
• One spouse is legal owner, but both spouses are beneficiaries
• Title of a corporate asset is in the name of the shareholder (bank/investment account, vehicle, etc.), shareholder is the legal owner but corporation is beneficial owner
• Assets registered to one corporation but beneficially owned by a related corporation
• Holding legal title on behalf of a joint venture or partnership

• Listed Trusts

Listed TrustsMAY NOT have a requirement to file (see point 3 below if required).  We have underlined the listed trusts most applicable to our clients.

The following are listed trusts that are most common to our clients (for full listing see Point 2.3 on the link above):

• a trust that has been in existence for less than three months at the end of the year
• a trust that only holds certain types of assets with a fair market value that does not exceed $50,000 throughout the taxation year (a trust that is required under the relevant rules of professional conduct or the laws of Canada or a province to hold funds for the purposes of the activity that is regulated under those rules or laws, provided it is not maintained as a separate trust for a particular client or clients (this provides an exception for a lawyer’s general trust account, but not for specific client accounts) 
• a graduated rate estate (estate within 36 months of date of death)
• a qualified disability trust
• a cemetery care trust, or a trust governed by an eligible funeral arrangement

• Penalties

There are significant penalties if you fail to file the T3 return (including the Schedule 15 beneficial ownership schedule) when it is due.  These penalties $25/day up to $2,500 OR are equal to the greater of $2,500 or 5% of the highest total fair market value of all property held by the trust in the year if a false statement or omission is knowingly made in the return or made under circumstances amounting to gross negligence.

DISCLAIMER – This is a basic flow chart that DOES NOT represent all outcomes and should not be relied upon for a determination of your filing requirement.  This is provided for general purpose only.