“THIS JUST IN – OKANAGAN RESIDENT BARES ALL!”

The Bare Necessities

 A bare trust (aka naked trust) is a type of trust that separates the legal and beneficial ownership of a property.  It is sometimes referred to as a principal-agent relationship. The legal owner, also known as the bare trustee, is typically the owner on record, similar to the individual or corporation listed on the legal title of a house. The beneficial owner is the party that is entitled to the benefits and subject to the risks of the property.

A bare trust arrangement is a legal concept so it is wise to contact your lawyer’s office if you’re curious to know whether a bare trust exists, as it must be legally determined based on the facts of each situation.

There are a number of bare trust arrangements but some of the most common types that we come across may include a parent adding their child to legal title for probate or other estate planning purposes, or a child adding their parent to legal title of a property in order to obtain financing (tough market these days!), with the child (or parent) not intended to have any true beneficial ownership interest in the property.

Why are we writing on this topic? We are glad you asked! New legislation in Bill C-32 is shaking things up. Before 2023, bare trusts were generally disregarded for Canadian income tax purposes meaning you were not required to file any returns. Any income and losses were reported only to the beneficial owners.

Times are changing, though! Under new trust reporting rules, tax years ending December 31, 2023, and later, bare trusts will be required to file an annual T3 trust return. The T3 return will need to include additional identification information the trustee, beneficiaries and other persons part of the trust arrangement. We caution you that there are significant penalties if not filed on time. Please note that our office does not assist in these filings and are providing this notice for awareness purposes only.

Check out this site if you’re curious about the procedure: Filing a T3 Return and speak with your accountant for additional information as to whether this filing requirement applies to you.

Please contact our office if you have any further questions about the new reporting rules. Please also note, however, that as lawyers, we are not licenced or insured to provide accounting or tax advice.

This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your real estate, corporate or estate planning needs, please contact our office at (250)448-2637 or any of our lawyers:

Una Kuzio: una@touchstone.law

Jane Otterstrom: jane@touchstone.law