Bare Trust Question
Are there any accountants on here who could help me understand this. If I cosigned a mortgage with my kid, does one automatically have to register it as a "Bare Trust"? Or would one only have to register it, if and when the main owner passes away? I read some stuff on the CRA page, and I am having a hard time deciding my position. Thanks, in advance!
https://globalnews.ca/news/10363565/...x-season-2024/ |
I'm in the same boat. I asked the local bank manager and my accountant and was told the accountant could set up a bare trust for 6 to 8 hundred dollars, he also told me to hang on and see what happens as the time limit on being fined has been bumped ahead. Clear as mud like any liberal boondoggle.
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If joint ownership… when you die the house automatically becomes your kids. Won’t be part of an estate. May have issues in the event your kid divorces as it isn’t inheritance. Also any other kids can’t share in your portion legally. I would err on the side of caution in an CRA question and just call them up. AOF members sleep occasionally at Holiday Inn Expresses… but we still aren’t the experts. To my read on this… if a joint owner… it’s not a trust. If you own a home or a partial share and have full control over the home for your child… that would more likely be a trust… especially if funds are controlled by yourself. |
Just back from a forum where this was discussed, made up on the fly and no one has a clue what the real implications are. :confused:
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https://financialpost.com/opinion/ne...rusts-disaster
Definitely looks like the whole process is messed up. Quote:
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Thanks, that's the way I read it as well. I will make some calls tomorrow. We just completed our will updates so will reach out to them and CRA. :happy0180: |
So sent an email to the lawyer who did our wills, they said "it could be a bare trust".
Talked to CRA and they said "we can't tell you if it is a bare trust or not, we can give you the definitions of it and then you must decide". Still not sure... |
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You guys might find this article from Scotia Wealth Helpful. It also has a link for expanded interpretation just puvlished bt Revenue Canada.
https://www.canada.ca/en/revenue-age...mber-2023.html https://livesocial.seismic.com/ljp_9a — Wealth Management Taxation, Scotia Capital Inc. March 5, 2024 Have you established an in-trust-for (ITF) account for your child or grandchild? Do you own a bank account, non-registered investment account, or certain other assets, such as real property, jointly with your parent, child, or others? If so, you may be subject to the new trust reporting requirements and required to file a T3 Trust Income Tax and Information Return (T3 Return). New trust reporting requirements The income tax rules governing which trusts must file an annual T3 Return have been expanded for trusts with a taxation year ending after December 30, 2023. Under the new trust reporting requirements, all trusts, unless specific conditions are met, must now file a T3 Return with the Canada Revenue Agency (CRA) and report additional beneficial ownership information annually. As a result, many trusts, including bare trusts, that did not previously have to file may now be required to file an annual T3 Return. What is a bare trust? A bare trust for income tax purposes includes an arrangement under which a trustee can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust’s property. There is no requirement for a bare trust to be documented or to sign a formal bare trust agreement establishing the parties’ intentions. The CRA notes that a trustee can reasonably be considered to act as agent for a beneficiary when the trustee has no significant powers or responsibilities, can take no action without instructions from that beneficiary, and their only function is to hold legal title to the property. For the trustee to be considered as the agent for all the beneficiaries of a trust, it would generally be necessary for the trustee to consult and take instructions from each and every beneficiary with respect to all dealings with all of the trust property. So, if you have legal ownership of an account or assets but only act as agent for a beneficiary and do not have beneficial ownership of the account or assets, you may be a trustee of a bare trust subject to the new trust reporting requirements. Examples of bare trust arrangements may include: You establish an ITF account for your child or grandchild, where you hold legal ownership of the account and assets, but your child or grandchild is the beneficial owner; You add your child(ren) as a legal owner of certain assets for ease of administration and probate planning purposes without transferring any beneficial ownership to them; or You add your parents as legal owners of real property for mortgage qualification purposes without transferring any beneficial ownership to them. What could the new trust reporting requirements mean to you? If you are the trustee of a bare trust, you may now be required to file an annual T3 Return, subject to certain exceptions, including Schedule 15, Beneficial ownership information of a trust (Schedule 15). Schedule 15 requires you to provide certain information on all trustees, settlors, beneficiaries, and controlling persons (persons who have the ability, through the terms of the trust or a related agreement, to exert influence over trustee decisions regarding the appointment of income or capital of the trust) of the trust. This information includes their name, address, date of birth (if applicable), country of residence, and tax identification number (e.g., Social Insurance Number, Business Number, Trust Number, or, in the case of a non-resident trust, the identification number assigned by a foreign jurisdiction). A T3 Return is due 90 days after a trust’s year-end. Bare trusts have a calendar year-end of December 31. So, 2023 T3 returns for bare trusts are due by April 2, 2024, as March 30 is a Saturday and April 1 is Easter Monday. What may happen if you do not file a T3 Return if required? You may be subject to penalties if you do not file a T3 Return if you are required to do so. Specifically for bare trusts, the late-filing penalty is $25 per day for each day the T3 Return is late, from a minimum of $100 to a maximum of $2,500. The CRA will only provide relief to bare trusts by waiving any late filing penalty for the 2023 tax year if the T3 Return, including Schedule 15, is filed after the filing deadline. This proactive relief is applicable for bare trusts only and only for the 2023 tax year. Notably, a different penalty may apply if you fail to file the T3 Return and Schedule 15 for the 2023 tax year knowingly or due to gross negligence. This penalty will be equal to the greater of $2,500 and 5% of the highest amount at any time in the year of the fair market value of all the property held by the trust. What are the exceptions to the new trust reporting requirements? There are exceptions to the new trust reporting requirements for certain trusts. Among others, these exceptions include: trusts that have been in existence for less than three months at the end of the year; trusts that hold only certain assets with a total fair market value that does not exceed $50,000 throughout the year, such as money (note that money does not include collectible gold or silver coins, or gold or silver bars); a share, debt obligation, or right listed on a designated stock exchange; a share of the capital stock of a mutual fund corporation; or a unit of a mutual fund trust; registered plans, such as Registered Retirement Savings Plans, Registered Retirement Income Funds, Registered Pension Plans, Tax-Free Savings Accounts, First Home Savings Accounts, Registered Education Savings Plans, Registered Disability Savings Accounts, Employee Profit Sharing Plans, and Deferred Profit Sharing Plans; a Graduated Rate Estate; and a Qualified Disability Trust. In conclusion The CRA has published information and guidance on the new trust reporting requirements on its website, New trust reporting requirements for T3 returns filed for tax years ending after December 30, 2023, as a helpful resource when determining and completing your annual income tax filing and reporting obligations. These new trust reporting requirements may be onerous, and you should consult with your tax advisor to review your circumstances, determine your applicable annual reporting requirements, and plan to meet the annual filing deadline, if applicable. This article is only an overview of the new trust reporting requirements. Everyone’s situation is unique, and any general tax planning opportunity may not benefit every person. Speak with your own tax and legal advisors for further discussion and analysis and before implementing any tax, estate, asset administration, or probate planning strategies. |
CRA isn't there to help you. And very frequently they give wrong answers.
And unless you get it in writing, whatever the call center dudes tell you isn't formal advice. They can tell you the wrong thing, and there are no consequences. https://www.oag-bvg.gc.ca/internet/E...2_e_42667.html Much better idea to talk to a tax pro. Quote:
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In the interest of being helpful, here's what a comment from a ridiculously smart CPA in my professional bubble:
"I hear a lot of lawyers advising that, as long as you legally own property that you do not beneficially own 100% (e.g. your name is on the account but it's not your money), you are holding property in trust, so a T3 is required." (Emphasis mine.) This is a very conservative approach, but hopefully gives a bit of clarity. |
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Another question for the professionals in our community
Since this first came to light, I’ve consulted with 3 different accountants about our situation and they are now all in agreement that we qualify as trustees under the Bare Trust directive. My sister and I and our elderly parents are all on joint bank accounts (for estate planning purposes only). Five of the accounts qualify but it’s our parents money and my sister and I don’t touch it.
Problem is that my sisters husband (a geologist) says his interpretation is that we don’t qualify as trustees on a Bare Trust so my sister is refusing to do the paperwork on her end. When my T3 goes into CRA, any thoughts on what will happen? Inquiring minds want to know 🤔…… |
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CRA has found another way to mess with your mind/money and they will eventually make you lose both.
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Refunds for those that Paid?
I wonder if there will be refunds for the folks that tried to comply already and paid an accountant to file. Not a chance. Another fine government program. Why in the hell do they care if I cosigned my kid's mortgage? What a waste of time and effort for everyone including CRA.
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It’s like they are purposely screwing everything up.
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