Please read… this may affect you.
You may be surprised to learn that the new and expanding Trust Reporting Requirements may affect you.
There are new and expanding tax reporting rules that impact trusts. The new rules are aimed at providing more transparency on beneficial ownership of assets and now require that more trusts (and estates) file additional tax reporting. These changes will impact many individuals and businesses. Many of these individuals may not even be aware that they have a trust. For instance, some relationships may expose you to potential tax penalties and other consequences for non-compliance.
Here is where you may have some unexpected exposure: The Bare Trust.
The rules have been recently expanded to include cases where a trust acts as an agent for its beneficiaries, commonly known as a Bare Trust. In such instances, the beneficial ownership is separated from the legal ownership.
Some common examples include:
- Being on the title for a child or parents’ home for financing or estate planning purposes.
- Having joint bank accounts or investment accounts with a parent or child for estate planning purposes.
- Having investment accounts ‘in trust’ for a child or grandchild.
- Only one spouse/common-law partner is on the title of a house although the other spouse /common-law partner is at least a partial beneficial owner.
- When an elderly person (parent/spouse) gives a child/spouse a power of attorney for finances, to manage all the financial affairs of the elderly person. As a result, when the child/spouse commences to act as trustee for the elderly person, a “Bare Trust” may be created.
- A corporation is on the title of an individual’s real estate, vehicle or other asset or vice versa
The rules became effective in 2023 with a filing deadline of April 2nd, 2024.
The CRA has continued to provide updated interpretations on how these changes may be implemented. The Canada Revenue Agency’s website has information on the new trust reporting requirements, which you may find helpful.
If you believe that these changes may apply to you, you may have a filing requirement and you should contact your tax professional to better understand the reporting requirements and to determine if they are applicable to your specific situation.
