Background
The term bare trust is not defined in the Income Tax Act (the Act). However, it is generally considered to be an arrangement under which a trustee can reasonably be considered to act as an agent for all the beneficiaries under the trust with respect to all dealings with all the trust’s property.
The CRA indicated that a trustee may reasonably be viewed as acting as an agent for a beneficiary where the trustee has no significant powers or responsibilities, cannot take any action without the beneficiary’s instructions, and serves solely to hold legal title to the property.
Although the CRA noted that a common example of a bare trust arrangement is where a property developer establishes a bare trust to hold registered title to real property while retaining beneficial ownership, concerns were raised that ordinary family arrangements could also be captured. For instance, a bare trust may arise where a parent is listed on title to a property solely to assist a child in obtaining a mortgage for the home in which the child resides. Similarly, jointly held property, such as a joint bank account, could also give rise to a bare trust arrangement.
Experience for 2023 T3 Reporting and bare trusts
In 2023, and during the 2023 trust filing season in early 2024, there was much discussion about bare trusts and the requirement for T3 Trust reporting for these arrangements. Non-compliance could result in significant penalties. The 2023 tax year marked the first time that bare trusts had an income tax reporting requirement.
Due to the broad reach of this new requirement and the lack of clarity as to what arrangements constituted bare trusts, the CRA recognized that these new filing requirements may have had an unintended impact on taxpayers. On March 28, 2024, the CRA announced that they would not require bare trusts to file a T3 returns, including Schedule 15, for the 2023 tax year, unless the CRA made a direct request for these filings. In addition, they pledged to work with the Department of Finance to further clarify its guidance on this filing requirement.
2024 Bare trust reporting
On Oct. 28, 2024, the CRA proactively announced that they will not require bare trusts to file a T3 return, including Schedule 15, for the 2024 tax year, unless the CRA made a direct request for these filings.
Proposed changes In Bill C-15 for 2026
Starting with 2026 year-ends, the wording in the income Tax Act, ITA, is proposed to be changed such that the previous references that caught bare trusts would be replaced with “deemed trusts” which are subject to T3 Trust reporting.
Under these proposals, a deemed trust will include any arrangement, that would not otherwise be considered a trust under the ITA, under which one or more persons (the legal owner) have legal ownership of property that is held for the use of, or benefit of, one or more persons or partnerships, and the legal owner can reasonably be considered to act as agent for the persons or partnerships who have the use of, or benefit of, the property.
This provision will encompass what we commonly know as bare trusts. Each legal owner of a deemed trust will be considered a trustee of the deemed trust, and each person or partnership that had use or benefit of the property will be considered to be a beneficiary of the deemed trust.
However, the proposed changes also list specific exceptions to arrangements that would otherwise be deemed trusts. Where one of these exceptions is met, no T3 Trust reporting will be required.
What are the exceptions?
The exceptions include the following common situations:
- Where family members property is held jointly, such ashold a joint bank account.
- Where a parent is on title to a property to allow a child to obtain a mortgage on the real property where the child resides.
- Where spouses jointly occupy a family home, but only one spouse is on title.
- Where a partner (other than a limited partner) holds property for the use or benefit of the partnership.
- Where property is held by a legal owner due to a court order.
- Where Canadian resource property is held for the use or benefit of one or more publicly listed companies or the subsidiaries or partnerships of such companies.
- Where a non-profit organization holds funds it has received from the federal or provincial government.
BDO can help
Bare trusts are commonly used in many types of personal and commercial arrangements, and it can be difficult to stay on top of the legislative changes, but BDO can help you navigate the process.
If you have any questions, contact your local BDO advisor today.
The information in this publication is current as of Jan. 28, 2026.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.