Estate Planning Corner: Changes to Trust Reporting in Canada

If you have a trust in your estate plan or are named in one, you’ll want to know about a significant change in Canadian tax law that took effect recently and could impact you or your family.

Starting with the 2023 tax year, most trusts are now required to file an annual T3 tax return, even if they previously didn’t need to. This change is part of a broader effort by the Canada Revenue Agency (CRA) to increase transparency and prevent tax evasion.

What’s New?

Trusts must now provide detailed information about all trustees, settlors, beneficiaries, and even protectors. This includes names, addresses, birth dates, and SINs or business numbers. The penalties for not filing can be significant—up to $2,500, plus additional amounts if there is deliberate non-compliance.

Note that Bare Trusts have been exempted for the 2024 tax year.

What is a “Bare Trust”?

Here’s where it gets tricky: many people don’t realize they’re part of a trust at all. For example, if you’ve added an adult child to the title of your home for estate planning reasons (but you still control it), this might be considered a bare trust, and now subject to these rules.

Why This Matters

This isn’t just a concern for the wealthy or complex estates. Many Canadians will now or soon need to disclose information about arrangements they thought were informal or didn’t involve the CRA.

What Should You Do?

If you’re unsure whether a trust you’re involved in needs to file, or if you’ve created informal arrangements that could qualify as a trust, now’s the time to speak with an estate planning professional.