Navigating the 2023 Enhanced Trust Rules: Your Accounting Lifesaver

Mark A Wales   |  

January 19, 2024

Important: New Reporting Requirements For Bare Trusts

As we head into the filling season for 2023 returns, we want to make you aware of new reporting requirements for Bare Trusts.  These requirements were originally set to come into effect last year, but they were delayed until this year.

We had hoped the federal government would further delay their implementation, as until late last month, the Canada Revenue Agency had provided very little guidance on these trusts, which remain mostly unknown to the general public – in fact, most people who have a Bare Trust may not be aware that they are involved in one.

What is a Bare Trust?

The term Bare Trust is not defined in the Income Tax Act but can be commonly understood as an arrangement where an individual or corporation may have legal title to assets (property or investments) without having any beneficial ownership of the assets.  The most common examples are:

•    Parents on the legal title of a child’s house where they do not personally reside.  Typically, such an arrangement is made for the child to obtain financing for the house.  In this scenario, the parents have the Bare Trust.

•    Children on the legal title of a parent’s house where they do not personally reside.  Typically, such an arrangement is made to avoid probate on the death of the parent.  In this scenario, the children have the Bare Trust.

•    Children who are on title for their parent’s investments where they do not have access to the investments or the right to access them without the permission of the parent.  This arrangement is also typical of estate planning to avoid probate.  In this scenario, the children have the Bare Trust.

•    Parents/grandparents who are holding accounts “In Trust For” a minor child/grandchild where no formal trust document was created, and the account is in excess of $50, 000.  In this scenario, the parents/grandparents may have a Bare Trust – there still seems to be some confusion over the status of these accounts at the time of writing.

•    An individual or corporation that holds legal title on a property to shield the identity of the beneficial owner from the public.  In this scenario, the party holding the legal title without any beneficial ownership has the Bare Trust.

What Happens If I Have a Bare Trust?

If you have a Bare Trust, you will need to file a T3 return for 2023 within 90 days of year-end.  On that return, the Bare Trust must disclose the identities (name, address, tax identification number, etc) of the trustees, the beneficiaries, and controlling individuals connected with the Bare Trust.

Also, if the Bare Trust includes a house, it must file an Underused Housing Tax (UHT) return for the 2022 year by April 30, 2024.  UHT returns will not be required for 2023 or subsequent years.

Failure to file the required T3 or UHT return could result in steep penalties, even if no tax is owing on the returns themselves.

How Do I File a T3 and/or UHT Return for My Bare Trust?

There are several steps required before filing any returns for the Bare Trust:

1.    Establish a name for the trust.  This can be as simple as your legal name followed by “Trust”.

2.    Draw up a written document for the trust.  Per the CRA’s most recent guidance, this does not need to be complex – it can be a handwritten summary of the trust arrangement, explaining what the purpose of it is.  Ideally, it should be signed by the trustee and the beneficiaries.

3.    Obtain a Trust Number from the CRA – to do so, you will need to provide them with the name of the trust and the written agreement.

4.    Gather the contact information for all the parties affected by the trust.

5.    File the T3 return within 90 days of the trust’s year-end (which will be December 31) to avoid late filing penalties.  This return must include the required information about the trustee and beneficiaries but does not need to include any income from the trust itself.

6.    If applicable, obtain a UHT filing number and file the 2022 UHT return by April 30, 2024 to avoid late-filing penalties.

Can You Help Me File My Bare Trust Returns?

Yes, we are happy to assist our clients in setting up their Bare Trusts with th CRA and filing the T3 and/or UHT returns by the filing deadlines.  However, as these deadlines are quickly approaching and there is a fair bit of work in getting the trust set up before filing, we ask that you contact us as soon as possible so we can get working on your return(s).

We understand that this may be a bit confusing – even the CRA seems to be having trouble explaining these new requirements.  If you have any questions, please contact our office.


Wales & Co.  Accounting & Taxes