If an Ontario resident added their adult child to a bank account or property title “just for convenience” before passing away, this arrangement legally creates a bare trust. While the CRA has exempted bare trusts from T3 filing requirements for the 2024 and 2025 taxation years, mandatory compliance begins for tax years ending on or after December 31, 2026 (filing in 2027) under Bill C-15, which received Royal Assent on March 26, 2026. Failing to disclose future reportable bare trusts can lead to substantial penalties.
Estate administration in Ontario has historically focused on probating wills at the Superior Court of Justice and distributing assets. However, a common estate planning shortcut has recently become a severe tax liability. For decades, aging parents in cities like Hamilton, London, and Toronto would simply add an adult child’s name to their primary bank account or the deed of their family home. The intention was merely convenience-allowing the child to sign cheques or pay utility bills-without actually gifting them ownership of the money.
The Canada Revenue Agency (CRA) strictly classifies these “convenience accounts” as bare trusts. 📜 Even though the parent retained true beneficial ownership of the money until death, the legal title was shared. While the CRA has deferred these bare trust reporting rules and exempted filings for the 2024 and 2025 taxation years, mandatory compliance begins for tax years ending on or after December 31, 2026 (filing in 2027) under Bill C-15, which received Royal Assent on March 26, 2026. Failing to understand these rules not only delays the estate’s administration but can expose the executor and the estate to devastating financial penalties when reporting becomes active.
Step-by-Step Process for Reporting Bare Trusts in Ontario
Navigating the T3 reporting requirements for bare trusts requires meticulous record-keeping. While the CRA has exempted bare trusts from filing T3 Trust Returns and Schedule 15 for the 2024 and 2025 tax years, executors must prepare for the new rules that take effect for taxation years ending on or after December 31, 2026 (filing in 2027). Under Bill C-15, here is the general process you must follow to ensure compliance.
Step 1: Identifying Bare Trusts vs. True Joint Ownership
Your first task is auditing the deceased’s accounts to determine the true nature of joint assets. Did the parent intend for the child to keep the money after death (Right of Survivorship), or was the child just a helper holding the asset in trust for the whole estate? If it was just for convenience, a bare trust exists. You must trace the source of the funds; if the parent deposited 100% of the money, it is overwhelmingly likely to be considered a bare trust by the CRA.
Step 2: Including the Asset in the Probate Application
If an account was a bare trust, the funds legally belong to the estate, not the surviving joint account holder. 💰 Therefore, you must include the full value of that bank account or real estate property on your application for a Certificate of Appointment of Estate Trustee. You are required to pay Ontario’s Estate Administration Tax (EAT) on these assets, completely defeating the family’s original goal of avoiding probate fees.
Step 3: Gathering Beneficiary Information (Schedule 15)
To file the new CRA requirements, you must collect extensive personal data. You need the Social Insurance Number (SIN), date of birth, and primary address for every party involved in the bare trust: the settlor (the deceased parent), the trustee (the adult child on the account), and the beneficiaries (the estate or the heirs in the will). Without this exact data, the CRA will reject the filing.
Step 4: Obtaining a Trust Account Number
Before you can file the paperwork, the bare trust must have its own identification. 💻 You must apply online via the CRA’s Trust Account Registration service to receive a T-number. This is completely separate from the deceased’s personal SIN or the estate’s primary trust account number. Each distinct bare trust arrangement technically requires its own registration.
Step 5: Filing the T3 Return starting in 2027
For taxation years ending on or after December 31, 2026, you must file a T3 Trust Income Tax and Information Return along with Schedule 15. The filing deadline is generally 90 days after the calendar year-end (usually March 30th of the following year). If you are administering an estate where the deceased passed away during a tax year covered by the CRA’s temporary exemptions (such as 2024 or 2025), no bare trust filings are required unless directly requested by the CRA.
How Much Does Bare Trust Compliance Cost in Ontario?
The administrative burden of the CRA’s expanded trust reporting rules directly translates into higher professional fees for the estate once the regulations are active.
| Expense Type | Estimated Cost in CAD (2026) | Details |
|---|---|---|
| CRA Late Filing Penalty | $25 per day (Max $2,500) | A mandatory penalty applied if you miss the filing deadline for the T3 (deferred and starting for 2026 tax years). |
| Gross Negligence Penalty | 5% of the asset’s value | If the CRA proves you intentionally hid the bare trust, the penalty is a minimum of $2,500 up to 5% of the highest value of the account. |
| Accounting Fees (T3 Prep) | $750 – $2,000+ | CPA fees to secure the trust number and file the complex Schedule 15 disclosures, applicable for 2026 tax years and onward. |
| Legal Consultation | $400 – $900 | Lawyer fees to determine if a joint account legally constitutes a bare trust or true survivorship. |
How Long Does the Process Take?
Identifying and reporting bare trusts can severely delay the distribution of an estate. Because bare trust reporting is deferred to tax years ending on or after December 31, 2026 (filing in 2027), estates wrapping up in 2025 or early 2026 will not experience these filing delays unless the CRA directly requests a return. For future years, however, obtaining a Trust Account Number typically takes 10 to 15 business days, potentially pushing estate distribution timelines back by several months.
Frequently Asked Questions (FAQ)
Does a bare trust have to pay income tax?
Generally, no. A bare trust acts as a passthrough entity. Any interest or capital gains earned by the convenience account are taxed in the hands of the true beneficial owner (the deceased parent’s final T1 or the estate), not the trust itself. The T3 is strictly for informational reporting.
What if the joint account held less than $50,000?
Under Bill C-15, bare trusts are completely exempt from T3 reporting requirements starting in the 2026 tax year if the total fair market value (FMV) of the trust property did not exceed $50,000 CAD at any time during the year (and is limited to low-risk assets like cash, deposits, and GICs).
Does a joint tenancy home count as a bare trust?
Yes, if the adult child was added to the title purely to help manage the property or avoid probate. However, under Bill C-15, there is a key exemption starting in 2026: if the real property is held by related individuals and qualifies as a principal residence for at least one of those individuals, it is exempt from bare trust reporting.
Can the CRA waive the late filing penalties?
The CRA completely exempted bare trusts from filing for the 2024 and 2025 tax years. These reporting rules now apply to taxation years ending on or after December 31, 2026. If you are dealing with future years under the new rules, you should ensure timely compliance as penalties remain substantial unless administrative relief is directly declared.
Do I need to report accounts held jointly with a spouse?
True joint accounts between married or common-law spouses are generally presumed to have a true Right of Survivorship, meaning the surviving spouse inherits the money completely. Under Bill C-15, joint accounts held between married or common-law spouses are also explicitly exempt from bare trust reporting.
Leave a Reply