Could You Have a Bare Trust Arrangement?

Bare trusts can arise in everyday family, property and financial arrangements, sometimes without the people involved realizing that a trust relationship may exist.

Beginning with the 2026 tax year, certain bare trusts will be subject to Canada's enhanced trust reporting rules. Depending on the circumstances, a reportable bare trust may be required to file a T3 Trust Income Tax and Information Return, even where the trust has no income or tax payable.

Not every bare trust will be required to file. Several exceptions apply, making it important to consider the specific facts of each arrangement.

What Is a Bare Trust?

Generally, a bare trust may exist where one person holds legal title to property or an account for the benefit of someone else, but has little or no independent power or responsibility over the property.

In simple terms, the person whose name appears on an asset may not be the person who is considered its true beneficial owner.

Whether a particular arrangement constitutes a bare trust depends on the facts and the legal relationship between the parties.

Common Family Situations to Review

Bare trust arrangements can potentially arise in situations such as:

• a parent and adult child holding a joint bank or investment account where the funds belong beneficially to only one of them;
• an adult child being added to a parent's property title for estate-planning or administrative purposes;
• a parent being added to a child's property title to assist with mortgage financing;
• an individual holding property on behalf of another family member; or
• certain “In Trust For” arrangements.

Simply having joint ownership does not automatically mean that a bare trust exists. The beneficial ownership of the property and the intention of the parties are important considerations.

What's Changing for 2026?

Bare trusts are not subject to the enhanced trust reporting rules for taxation years ending in 2024 or 2025.

For taxation years ending on or after December 31, 2026, certain bare trusts become subject to the trust reporting rules.

Where a bare trust is reportable, a T3 Trust Income Tax and Information Return and the applicable beneficial ownership information may be required.

CRA has indicated that additional information will be provided in advance of the filing season for trusts with taxation years ending December 31, 2026.

Not Every Bare Trust Will Need to File

The legislation provides several exceptions from the reporting requirement.

Whether an exception applies depends on factors such as:

• the type and value of property involved;
• the relationship between the legal and beneficial owners;
• how the property is used;
• whether the arrangement involves a principal residence; and
• the particular circumstances under which legal title is being held.

Because the rules contain detailed conditions, an arrangement should not be assumed to be exempt based on one factor alone.

Why Review These Arrangements Now?

Families often establish joint ownership or add another person's name to an asset for convenience, estate planning, financing or succession purposes.

The new reporting rules provide a good reason to review these arrangements before year-end and confirm:

• who legally owns the asset;
• who beneficially owns the asset;
• why another person's name was added;
• who contributed the funds used to acquire the asset;
• who receives the income or proceeds from the asset; and
• what is intended to happen to the asset upon death.

Keeping documentation that supports the purpose and beneficial ownership of an arrangement may also be helpful.

Estate Planning Considerations

Reviewing a possible bare trust arrangement can also provide an opportunity to consider your broader estate plan, including:

• joint ownership arrangements;
• beneficiary and successor-holder designations;
• wills and powers of attorney;
• probate and estate-administration considerations; and
• how financial assets are intended to transfer upon death.

Ownership decisions made for convenience can sometimes have unintended tax, legal or estate consequences. Changes to an existing arrangement should therefore be considered carefully and, where appropriate, discussed with your legal and tax advisors.

Beneficiary Designations and Estate Planning

Certain financial and insurance products allow a beneficiary or successor holder to be named directly.

Depending on the product and circumstances, appropriate beneficiary designations may help simplify the transfer of assets at death and may allow proceeds to pass outside the estate, potentially reducing probate and estate-administration requirements.

For example, segregated fund contracts include insurance-based beneficiary designation features that can form part of an overall estate plan.

These strategies are not appropriate in every situation. Product features, costs, taxation, investment objectives and the overall estate plan should all be considered before making changes.

What Should You Do?

If another person's name appears on one of your bank accounts, investment accounts or properties—or your name appears on an asset that is beneficially owned by someone else—it may be worthwhile to review the arrangement.

MWFS can help you identify arrangements that may warrant further review and discuss the tax and estate-planning considerations with you. Where legal advice is required, we may recommend that you consult your lawyer or other qualified legal professional.

Have Questions About a Possible Bare Trust?

Contact your MWFS Representative or Account Manager to discuss your circumstances.

Contact MWFS

Additional Information

For detailed information about Canada's enhanced trust reporting requirements, including the rules applying to bare trusts, visit:

Canada Revenue Agency — Enhanced Reporting Rules for Trusts and Bare Trusts: Frequently Asked Questions

Tax and trust reporting requirements depend on individual circumstances and may change. The information above is general in nature and should not be considered legal or tax advice. Please consult the appropriate professional regarding your particular circumstances.