The Surroundup
BARE TRUSTS – RULE CHANGES FROM 2023 AND WHAT’S AHEAD FOR 2024
- by Andrew Hawryluk
- August 28, 2024
You may recall in our prior writing from February of this year we had detailed the changes for Trust reporting rules starting for the 2023 filing year which came with the inclusion for new reporting Trusts.
Those new rules came with many questions for investors which included the issue for “bare trusts” which are an arrangement under which a trustee can reasonably be considered to act as agent for beneficiaries under the trust with respect to dealings with the trust’s property. These types of accounts can include such things as in-trust accounts for minors and certain jointly-held arrangements etc. The panic of filing a T3 Income Tax and Information Return (T3 Return) including Schedule 15 (Beneficial Ownership Information of a Trust) began to set in. CRA however made an announcement on March 28, 2024 (a few days before the April 1st, 2024, deadline) that they would not require a bare trusts to file a return for the 2023 year, unless CRA makes a direct request for these filings.
Where are we now? August 2024
On August 12, 2024, the Department of Finance indicated that it would move forward with consultations to advance key 2024 budget priorities, and announced a series of updated and corrected legislation in the federal Income Tax Act. As part of the announcement, new and amended legislation on the trust reporting rules was announced with the intention to “significantly reduce the number of Canadians with bare trusts who would have to file and ease the related administrative burden.” Specifically, the following administrative relief measures were announced:
- The addition of a new exception (proposed s. 150(1.2)(b.1)) for trusts and deemed trusts (e.g., bare trusts) where:
The trustee is an individual;
Each beneficiary is an individual and related to the trustee(s);
The total fair market value of the property of the trust does not exceed $250,000 throughout the year, and,
The trust’s only assets held throughout the year are one or more excluded assets which would include, among others, money, securities traded on a designated stock exchange, mutual fund trusts and mutual corporations and segregated funds. It would also now include GICs issued by a Canadian bank or trust company incorporated under Federal or provincial law, as well as personal use property.
- The creation of a new “deemed trust” rule containing several explicit exclusions, including one where certain trust property is real property held by one or more related legal owners and is a principal residence of one or more of the related legal owners, and one where real property is held for the benefit of a spouse or common-law partner and is a principal residence of the legal title holder.
How does this impact me?
For most of us it looks like CRA intends to allow certain bare trusts to be excluded from the reporting requirements, potentially as early as the 2024 tax year if the amended legislation is adopted and formally introduced into law. It’s important to note that the announcement of August 12th, 2024, is proposed legislation at this point. We will further update everyone once (and if) this is passed into law.
Be well, stay connected, and remember, there’s more than one way to wealth!
By Andrew Hawryluk
Wealth Advisor
Assante Financial Management Ltd.
The opinions expressed are those of the author and not necessarily those of Assante Financial Management Ltd. This material is provided for general information and the opinions expressed and information provided herein are subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on the information presented, please seek professional financial advice based on your personal circumstances.