The Bare Trust Debacle

Why Canada’s new trust reporting rules caused unnecessary confusion

Introduced effective for tax years ending after 2023, the new reporting requirements captured many trusts that previously were not required to file.

The idea was laudable in that it attempted to address artificial structures designed to avoid tax. It was intended to increase transparency and meet international anti-money laundering / terrorist financing commitments.

However, as in so many tax issues, there were unintended consequences.

The definition of a trust is much broader than most people understand — including, it would seem, those in the Department of Finance.

Trusts are unusual in that they come into existence through actions, not through formal intervention.

Under the new rules, subject to limited exceptions, all express trusts (trusts between living people) must file a T3 return and list trustees, beneficiaries, settlors and others with influence over the trust.

And that included bare trusts. These are arrangements where one person has legal title to a property that is held for someone else’s beneficial ownership.

Common examples can be:

• Co-signing a mortgage to assist with financing.
• Parents or grandparents opening a savings account for a minor (In Trust For accounts).
• Adding an adult child to the title of a home or cottage so it transfers directly on death.

And the one that scared us the most, a simple joint account.

After CRA heard the concerns, they announced that they won’t require bare trusts to file unless CRA specifically requests the filing. A smart, administrative move that preserves the intent of the Bill without adding compliance complexity for most Canadians.

Draft legislative proposals have been introduced to clarify how parts of Bill C-32, especially around bare trusts, will be applied.

For most Canadians, the CRA’s current administrative approach means these new reporting rules should not create any immediate concern. That said, trusts can arise in ways people don’t expect, and individual circumstances do matter. If you’re unsure whether an arrangement you’re involved in could be considered a trust, a conversation with a trusted tax advisor can provide clarity and peace of mind.

The intent behind the new trust reporting rules was sound: transparency matters, and financial systems rely on trust as much as they rely on enforcement. But this episode also illustrates how easily well-intentioned policy can outpace everyday understanding. When rules become detached from how people live, confusion follows. The pause on bare trust filings restored some balance, but the lesson remains. Good tax policy is not just about catching bad actors — it is also about ensuring ordinary Canadians can reasonably understand their obligations without needing to become experts in trust law.