Do Bare Trusts Still Have To File a T3? The Rules, the Exemptions, and Where They Stand Now

A bare trust is the arrangement nobody thinks of as a trust: legal title in one name, beneficial ownership in another. A parent co-signs a mortgage and goes on title for financing; an adult child is added to an aging parent's bank account for convenience; a corporation holds land as nominee for a partnership. For decades these arrangements had no filing obligation because the income was simply reported by the beneficial owner. The expanded trust reporting rules, first effective for tax years ending after December 30, 2023, changed that: trusts, including bare trusts, were required to file a T3 return with Schedule 15 identifying settlors, trustees, and beneficiaries — with penalties for not filing. The compliance wave that followed prompted the CRA to exempt bare trusts from filing for 2023 (announced days before the deadline) and then to exempt them for taxation years ending on or after December 31, 2024 and before December 31, 2026 — covering the 2024 and 2025 tax years — while the Department of Finance reworks which bare arrangements are caught at all. The obligation has not been repealed; it has been deferred and is being redrawn, so the current-year answer still has to be checked against the CRA's latest announcement rather than assumed.

Key takeaways

• A bare trust exists whenever legal and beneficial ownership are split and the trustee acts only on the beneficial owner's instructions — no trust deed required. Title for financing, accounts held for convenience, and nominee corporations are the classic cases.
• The expanded reporting rules require affected trusts to file a T3 with Schedule 15 (name, address, date of birth, jurisdiction, and taxpayer identification number for every settlor, trustee, beneficiary, and controlling person), with a $25/day late-filing penalty (minimum $100, maximum $2,500) and a gross-negligence penalty of the greater of $2,500 and 5% of the property's value.
• The CRA has exempted bare trusts for the 2023, 2024, and 2025 tax years — taxation years ending on or after December 31, 2024 and before December 31, 2026 — unless the CRA directly asks for a return. Express trusts (family trusts, alter ego trusts, estates beyond their exempt window) still file.
• Proposed amendments would narrow which bare arrangements are caught at all — related-party title splits under value thresholds, spouses on title together, legal owners who are also among the beneficial owners. Because the exemption currently runs only through taxation years ending before December 31, 2026, and the narrowing rules are not yet enacted, treat the status as provisional and check the CRA's trust-reporting page for the current year before concluding no return is due.
• The US side is separate and unaffected: a bare trust is generally disregarded for US tax purposes (the beneficial owner reports the income), but a US-person beneficial owner still reports the underlying account on the FBAR and Form 8938, and a US person on title to a Canadian account as a convenience signatory has FBAR signature authority reporting even with no beneficial interest.

Why the net was cast so wide

The reporting rules were drafted to capture beneficial ownership information, and a bare trust is precisely a beneficial ownership arrangement. The result was that ordinary families were suddenly trustees: the mother on title to her son's condo so the bank would lend, the daughter on the father's chequing account to pay his bills, the cottage held by one sibling for all four. Each of these is a trust at law, and each was, for 2023, a trust with a filing obligation and identity disclosure on Schedule 15. The exemptions acknowledged that the compliance burden landed on arrangements with no tax avoidance in them.

What still files while bare trusts are exempt

The bare trust exemption is narrow. Express trusts file: the family trust holding investments or private company shares, the alter ego trust, the testamentary trust past its graduated rate estate window, the in-trust-for account that has crossed from convenience into a true express trust. Estates administered beyond the exempt period file. And a bare trust the CRA directly asks to file must file. The Schedule 15 identity requirements apply to all of them, including a US taxpayer identification number for US-person beneficiaries — which is often the first time a Canadian family trust confronts the fact that a beneficiary who moved to Florida is now a disclosure item.

The cross-border overlay

For a family with US persons in it, the bare trust question runs on two tracks. Canada asks: is there a T3 obligation this year? The US asks a different question entirely: who beneficially owns the income and the account? A US person who beneficially owns a Canadian account titled in a parent's name reports the income on their 1040 and the account on the FBAR regardless of anything the CRA exempts. A US person who is merely on title — the convenience signatory — has no income to report but may have FBAR signature-authority reporting. And if the arrangement is not bare — if the trustee has real discretion — it is not a bare trust at all; it is an express trust, the T3 exemption does not apply, and for the US person involved the foreign trust rules (Forms 3520 and 3520-A) come into play.

Worked example

A Toronto father is on title to 1% of his daughter's Mississauga townhouse, added in 2021 so the bank would approve her mortgage. The daughter became a US resident in 2025 and now lives in Tampa. For 2023, 2024, and 2025 the bare trust filed no T3 under the CRA's exemptions, which run through taxation years ending before December 31, 2026. For a later year the family checks the CRA's announcement before the March 31 trust deadline: if the exemption is extended or a proposed carve-out (legal owner related to the beneficial owner, principal residence) holds, no T3; if the rules as enacted then require filing, the father files a T3 with Schedule 15 disclosing himself as trustee and his daughter as beneficial owner, including her US taxpayer identification number. On the US side nothing turns on the CRA's choice: the daughter beneficially owns a Canadian-situs home she lives in as her former principal residence, reports any rental income on her 1040, and the bare arrangement itself is disregarded — no Form 3520.

Official sources

The CRA states that "Bare trusts are not subject to the trust reporting rules and are therefore not required to file a T3 return, including Schedule 15, for taxation years ending on or after December 31, 2024 and before December 31, 2026" (and were exempted for 2023 as well); other affected trusts must file a T3 with Schedule 15 for tax years ending after December 30, 2023. The T3 late-filing penalty is "$25 a day... from a minimum of $100 to a maximum of $2,500," and the gross-negligence penalty is "the greater of $2,500 and 5% of the highest amount of the fair market value of all the property held by the trust at any time in the year." — Canada Revenue Agency, New trust reporting requirements for T3 returns, https://www.canada.ca/en/revenue-agency/services/tax/trust-administrators/t3-return/new-trust-reporting-requirements-t3-filed-tax-years-ending-december-2023.html

The IRS explains the reporting obligations attached to foreign trusts: a US owner of a foreign trust ensures the trust files Form 3520-A, US persons report transfers to and distributions from foreign trusts on Form 3520, and distributions of accumulated income to US beneficiaries can be subject to the accumulation distribution (throwback) rules with an interest charge. — Internal Revenue Service, Foreign trust reporting requirements and tax consequences, https://www.irs.gov/businesses/international-businesses/foreign-trust-reporting-requirements-and-tax-consequences

Practitioner note

Bare trust status is the question we re-verify every season, because the answer has kept moving: rules in, then exemptions for 2023, 2024, and 2025, with narrowing amendments still being reworked. The practice point is stable even while the rules are not — inventory every title-splitting arrangement in the family now, decide which are bare and which have quietly become express trusts, and then the annual filing question is a lookup instead of a scramble.

See also: Browse every cross-border tax topic guide, organized by situation.

Next step

Fairlight prepares the trust reporting inventory for cross-border families — which arrangements are bare, which file a T3, and what the US person in the structure reports. See cross-border pricing or book a call.