21 Sep Bare Trust Filing: What You Need to Know Before Year-End

Bare Trust Filing: What You Need to Know Before Year-End

If someone asked whether you have a “trust,” most people would think of a formal living or testamentary trust and reply yes or no. The Canada Revenue Agency (“CRA”) has a much broader definition of trust than most people expect. A lot of everyday arrangements, both personal and corporate, qualify as something called a “bare trust”, whether or not it was called a trust at the time.

Starting with the 2026 tax year, arrangements that qualify may need to be reported to the CRA. That first filing will be due by the end of March 2027. This may sounds far away, but simply figuring out whether they have a reportable bare trust will take longer than they expect.

Legal ownership versus beneficial ownership

To understand a bare trust, it helps to separate two ideas that we normally lump together as just “ownership.”

• Legal Ownership = whose name is on the paperwork. It’s the name on the property title, the name on the bank account, the name on the share certificate, etc.
• Beneficial Ownership = who actually benefits from the property, who controls it, and who bears the risk and reward of it. In most everyday situations, the legal owner and the beneficial owner are the same person, and nobody thinks twice about it.

A bare trust arises whenever those two things split apart. The legal owner is holding the property in name only, with no real discretion of their own, while someone else is the true owner in every practical sense. The legal owner is essentially a placeholder, required to act on the instructions of the beneficial owner. For tax purposes, beneficial ownership is what we care about.

How this shows up for individuals

This is where the rule catches a lot of people off guard, because these arrangements are common and usually set up for entirely practical reasons, not for tax planning.

A few common examples are:

• a parent added to the title of an adult child’s home so the child can qualify for a mortgage, even though the parent has no real interest in the property;
• an adult child added to a parent’s bank account to help manage finances as the parent gets older, even though the money is still entirely the parent’s;
• a parent who opens an investment account “in trust for” a minor child, controlling it today but intending to hand it over once the child is an adult; or
• a cottage held in one sibling’s name for convenience, even though ownership is really meant to be shared.

None of these situations involve a formal trust document. Nobody sat down and drafted a trust deed., but the CRA looks at substance rather than paperwork, and each of these can be treated as a bare trust for reporting purposes.

How this shows up for businesses

The same idea applies inside a corporate structure. A holding company might hold real estate in name only, on behalf of an operating company or a group of shareholders. A nominee corporation may have been set up years ago purely for financing or lender requirements, where legal ownership sits in one entity but the real decision making sits elsewhere. Property held jointly by a group of business partners through one named party, common in real estate developments and joint ventures, can also fall into this category, along with older arrangements set up for a specific deal that nobody has revisited since.

The exemptions, at a high level

The rules do build in relief for many of the situations described above and these have been expanded as the rules have developed. Some of the exemptions are:

• If the combined value of the property stays under $50,000 throughout the year, regardless of what the property is.
• A higher threshold of $250,000 for arrangements among related individuals provided the property is limited to things like cash, GICs, publicly traded securities, and certain other qualifying assets.
• Arrangements where everyone on legal title is also a beneficial owner, such as a true joint account between spouses, are generally exempt.
• Where a parent on title of a child’s principal residence purely to support financing, and similar related person situations involving a principal residence.

These categories have specific conditions attached, and the CRA has indicated more detailed guidance is still coming ahead of the 2026 filing season, so it’s worth confirming where a specific arrangement lands rather than assuming.

What to do before year-end

The people and businesses who come through this smoothly will be the ones who start now rather than waiting for filing season. That means reviewing your personal and corporate arrangements and considering who holds legal title versus who really controls and benefits from the property. It also means digging up older arrangements, whether that’s a joint account added years ago or a nominee company set up for a long-forgotten deal, and checking whether they fall within one of the exemptions described above. Finally, it means starting to gather the information a return would require, since identifying details for everyone involved can take time to track down if people or entities have changed over the years.

This article is for general information only and isn’t a substitute for advice on your specific situation. If you’re not sure whether an arrangement in your family or your business could be a bare trust, reach out to your advisor at Clearline. We’re happy to help you sort it out.