Incoming Amendments To Trust Reporting Requirements

Proposed legislation to update trust reporting requirements under the Income Tax Act (the "ITA") was released in August 2024 and amended in August 2025. While these amendments are not yet enacted, on November 18, 2025, the Federal Government tabled Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025, which reflects Canada's intention to implement the proposed changes to the trust reporting regime.

While the legislative changes are not yet law, the Canada Revenue Agency (the "CRA") continues to provide administrative guidance on how it intends to apply the incoming reporting requirements (CRA, "Enhanced reporting rules for trusts and bare trusts: Frequently asked questions).

Presently, the CRA does not require bare trusts to file a T3 Trust Income Tax Information Return (a "T3 Return"), including a Schedule 15 ("Beneficial Ownership Information"), for the 2025 taxation year (unless specifically requested). However, certain bare trusts may be subjected to T3 reporting requirements for taxation years ending on or after December 31, 2026 (CRA, "What has Changed").

Bare Trust's May Arise in the Context of Estate Planning

A trust is an equitable relationship whereby a person (the "Trustee") holds legal title to property and deals with such property for the benefit of another person or class of persons (the "Beneficiaries"). A trust separates legal ownership from beneficial ownership. A trust is commonly created by an individual during their lifetime (inter vivos trust) or pursuant to a Will (testamentary trust).

A bare trust is an arrangement where the Trustee holds legal title to property but has no independent powers, responsibilities, or discretion to deal with such property. In this sense, the Trustee acts as the Beneficiary's agent.

In the context of estate planning, bare trusts may arise where legal title to property is held by one person for the benefit of another, such as:

• the addition of an adult child (or children) as joint tenants on real property; or
• the addition of an adult child (or children) as joint holders of bank accounts and non-registered investment accounts.

Both arrangements are often taken for estate administration purposes, including potentially limiting estate administration tax.

The Proposed Changes May Narrow the Reporting Requirements for Certain Bare Trusts

Subject to certain exceptions, subsection 150(1) of the ITA requires trusts to file an annual T3 return. Generally, trusts that are required to file a T3 return must also provide beneficial ownership information by filing Schedule 15, with the T3 return (Income Tax Regulations, CRC, c 945, s 204.2(1)).

Presently, subsection 150(1.3) of the ITA provides that for reporting purposes, "...a trust includes an arrangement under which a trust can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust's property." As a result, bare trusts are captured under the general reporting requirements (CRA, "Who Should File").

Despite the broad inclusion of bare trusts under the current legislation, the CRA confirmed that bare trusts are not required to file a T3 Return for 2023, 2024, or 2025 taxation years. However, bare trusts should prepare to potentially report for taxation years ending on or after December 31, 2026 (CRA, "What has Changed").

Under the proposed legislation the existing subsection 150(1.3) is repealed and replaced with new subsections (proposed 150(1.3) and 150(1.31)) that clarify what counts as a "bare trust" for the purpose of reporting obligations(Explanatory Notes Relating to the Income Tax Act and Other Legislation).

Per the draft legislation, certain arrangements will be exempt from the filing requirements. The bare trust filing exceptions under the proposed amendments (proposed 150(1.31)) are expected to include, but are not limited to, circumstances where:

• All beneficiaries are also legal owners of the trust property, and all legal owners are beneficiaries;
• The legal owners are all related individuals where the trust property is real property that would qualify as the principal residence of one of the legal owners; and
• The legal owner is an individual, and the property is real property that is held for the benefit of the legal owner's spouse or common law partner and would be a principal residence if designated as such;

Furthermore, certain trusts that meet specific criteria under the proposed changes may be exempt from T3 filing requirements. If a T3 return is required, certain trusts may not be required to file Beneficial Ownership Information in addition to the T3 if certain conditions are met. The conditions include, but are not limited to:

• The trust has existed for less than three months during the tax year (subject to specific exclusions) (proposed 150(1.2)(a));
• The trust holds any asset with a total fair market value (FMV) not exceeding $50,000.00 throughout the year (proposed 150(1.2)(b)); and
• The following conditions are met (proposed 150(1.2)(b.1)(i)-(iii)):
  • Each trustee is an individual
  • Each beneficiary is an individual related to each trustee; and
  • The total FMV of the trust property does not exceed a FMV of $250,000 and the only assets held by the trust throughout the year include:
    • Money;
    • GICs issued by Canadian banks, trust companies, or credit unions;
    • Certain debt obligations;
    • Securities listed on designated stock exchanges;
    • Interests in mutual or segregated funds;
    • Personal-use property of the trust;
    • The right to receive income or gains on the above listed assets; and
    • Certain exempt life insurance policies issued by a Canadian insurer.

The above-mentioned exemptions are proposed and will apply only once the legislation is enacted and receives Royal Assent.

Estate Planning Considerations

When evaluating estate planning strategies, it is important to not only consider the potential tax benefits of a particular structure, but also the ongoing compliance and administrative requirements that may arise during one's lifetime. Although it is likely many common arrangements may qualify under the proposed bare trust reporting exemptions, it is necessary to determine if such exemptions apply.

Engaging both legal and tax professionals can help ensure an estate plan remains tax efficient, compliant, and administratively sustainable.

Proposed trust reporting changes may affect common estate planning strategies, including joint ownership arrangements.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.