Enhanced Bare Trust Filing Rules
In recent years, the CRA introduced enhanced reporting requirements for trusts, including bare trusts, which caused confusion for many Canadians — particularly because these arrangements are very common in everyday situations. Greater clarity was provided when Bill C-15 received Royal Assent in March 2026, helping taxpayers better understand when filing obligations apply.
If a trust is required to file a T3 information return and does not, there can be significant penalties. The standard penalty is generally $25 per day (minimum $100, up to $2,500), and in some cases of gross negligence, penalties can be much higher [up to 5% of the fair market value (FMV) of trust assets].
1) What is a Bare Trust?
The term “bare trust” is not specifically defined in the Income Tax Act (ITA), but it is commonly used to describe a very simple type of ownership arrangement.
A bare trust exists when one person holds legal ownership of a property, but someone else is the true owner and receives all the benefits. In simple terms, the legal owner is just a “name on paper”, holding the asset for another person.
Please note whether a trust including bare trust arrangement exist has to be advised by a legal counsel.
Real-life examples for arrangement to be treated as bare trusts
Example 1: Parent on title for mortgage purposes
A parent is added to the title of a home to help a child qualify for a mortgage.
The child pays for the home and lives there
The parent has no financial interest
The parent may be acting as a bare trustee.
Example 2: Joint bank accounts for convenience
An elderly parent adds an adult child to a bank account for bill payment purposes
The money still belongs to the parent
The child may be acting as a bare trustee
Example 3: Corporation nominee arrangement
A corporation holds legal title to property on behalf of a shareholder
The corporation may act as a bare trustee
2) Exemption from T3 Filing for Bare Trusts (2026)
The good news is that some bare trusts do NOT need to file a T3 return if they meet certain conditions. Under the rules in the ITA, a trust is exempt from filing if it falls under specific categories.
Some common exemptions
A trust does NOT need to file if:
It existed for less than 3 months in the year
It holds assets with a total FMV that does not exceed $50,000 throughout the year;
It holds assets with a total FMV that does not exceed $250,000 throughout the year where:
a) Each trustee must be an individual
b) Each beneficiary must be an individual AND related to each trustee
c) Holding permitted asset types
It is a professional trust account (e.g. lawyer trust account) under certain conditions.
In addition, the ITA provides specific exceptions for certain bare trust arrangements, including:
Everyone who benefits from the property is also listed as a legal owner and there are no legal owners that are not considered to be beneficiaries
The legal owners are all related individuals, and the property is real or immovable property that could be designated as a principal residence by at least one of the legal owners.
Property held for the use and benefit for a spouse/common-law partner and could be designated as a principal residence by the legal owner.
The property in the trust is held only for the use or benefit of a partnership during the entire year. Every legal owner of the property is also a partner in that partnership. At least one partner is required (or would be required) to file an information return for the partnership for a fiscal period that includes December 31 of that year.
3) When Bare Trusts may still need to File
Even though many bare trusts are exempt, some very common real-life situations may still require a T3 return filing.
Example 1: Parent on title for adult child (investment property)
A parent is added to the title of a rental condo to help the child qualify for financing
The child pays all costs and reports all rental income
Property FMV: $800,000
Why filing may still be required once lawyer confirm this is bare trust arrangement:
The value exceeds exemption thresholds (e.g. $50,000 / $250,000 limits)
Principal residence is not applicable for legal owner
Example 2 : Joint bank account
An elderly parent adds an adult child to a bank account for probate purpose
Account balance(FMV not Cost) throughout the year: $400,000
The money belongs entirely to the parent
Why filing may still be required once lawyer confirm this is bare trust arrangement:
The account balance exceeds the $250,000 threshold
Example 3: Corporation holding property as nominee
A corporation holds title to a commercial property for an individual investor
Property FMV: $1.2 million
Why filing may still be required once lawyer confirm this is bare trust arrangement:
The value exceeds exemption thresholds (e.g. $50,000 / $250,000 limits)
Trustees and beneficiaries are not all individuals
The enhanced bare trust reporting rules are expected to introduce a significant compliance burden for Canadians for 2026 tax year. If you believe you may be subject to these rules, please consult with your legal counsel and tax advisor in advance to prepare for your 2026 T3 filings which is due March 31, 2027.
Reference:
Enhanced reporting rules for trusts and bare trusts: Frequently asked questions - Canada.ca
Disclaimer
The information above is based on the Income Tax Act and CRA administrative guidance available as of May 22, 2026. It is provided for general informational purposes only and does not constitute tax, legal, or accounting advice. Individual situations vary, and tax rules can be complex. Please consult a qualified tax professional for advice tailored to your specific circumstances.
