Bare trust reporting in Canada: the T3 rules

Canada’s bare trust reporting rules have been a moving target since 2023. The government introduced a T3 filing requirement for bare trusts, suspended it twice, and then brought it back for 2025 with a $50,000 threshold. If you’re a Canadian holding property as nominee for someone else, or you hold joint title with a family member and the legal arrangement amounts to a bare trust, you now have a filing obligation. And if there’s a US person on either side of the arrangement, a second layer of reporting kicks in under US law. This guide walks through who has to file, what the filing requires, the penalties for getting it wrong, and the cross-border complications that catch people off guard.

What exactly is a bare trust in Canada?

A bare trust exists where one person (the trustee) holds legal title to property, but has no independent duties or powers beyond dealing with the property as the beneficial owner directs. The trustee is a nominee, nothing more.

In common law provinces, a bare trust arises when the trustee’s only obligation is to convey the property or deal with it at the beneficiary’s instruction. The trustee has no discretion. Think of a parent who holds the title to an investment account or a piece of real estate for an adult child. The parent’s name is on the account or the deed, but the child controls the property and is entitled to all the income and proceeds. That’s a bare trust.

The Income Tax Act defines “trust” broadly. ITA 104(1) says a reference to a trust “shall, unless the context otherwise requires, be read as a reference to the trustee, or the executor, administrator, heir or other legal representative, having ownership or possession of the trust property.” For years, the CRA’s administrative position was that bare trusts were look-through for tax purposes: income was reported by the beneficial owner directly, and the bare trustee generally didn’t need to file a separate T3 return. That changed with the new reporting rules.

Quebec sits differently. Under the Civil Code (articles 1260 to 1298), a trust involves a “patrimoine d’affectation” (patrimony by appropriation), where trust property belongs to no one, not the trustee, not the beneficiary. The concept of a bare trust, where the trustee holds legal title as a pure nominee, doesn’t map onto Quebec civil law in the same way. But the ITA is a federal statute. The reporting obligations under ITA 150(1.2) apply to “arrangements” where a person holds property as nominee, which catches Quebec nominee arrangements regardless of how provincial law characterizes them.

Why did Canada start requiring T3 filings?

The federal government introduced the bare trust reporting requirement as part of its push for beneficial ownership transparency. The concern was that nominee arrangements let the real owners of property stay invisible to the CRA.

Before the rule change, bare trusts were largely invisible in the tax system. The income from the property was reported by the beneficial owner on their own return, and no separate trust filing disclosed who the trustee was, who the beneficiary was, or what property was held. The government’s stated goal with the enhanced trust reporting rules (initially proposed in Budget 2018 and enacted through Bill C-32 in 2022) was to close that gap. Every trust, including bare trusts, would have to file a T3 return disclosing the identity of the trustees, beneficiaries, and settlors.

The policy rationale ties into Canada’s broader anti-money laundering and beneficial ownership framework. Real estate nominee arrangements, in particular, have been under scrutiny in provinces like British Columbia and Ontario, where property held by nominees can obscure the true buyer. The T3 filing requirement gives the CRA a direct line of sight into these arrangements.

When does the filing requirement take effect?

The rule was supposed to apply starting with the 2023 tax year, but the CRA suspended the requirement for bare trusts twice, first for 2023 and then for 2024. The filing obligation is now mandatory for the 2025 tax year and onward.

Here’s the timeline. ITA 150(1.2), as enacted through Bill C-32, required all express trusts (including bare trusts) to file T3 returns starting with the 2023 tax year. The CRA announced on March 28, 2024, just days before the April 2 filing deadline, that bare trusts would be exempt from filing for 2023 “unless the CRA makes a direct request.” The 2024 federal budget then extended that exemption to the 2024 tax year. Starting with the 2025 tax year, bare trusts must file if the total fair market value of the trust’s property exceeds $50,000 at any time during the year.

That $50,000 threshold was a concession. The original legislation had no dollar minimum, which would have caught trivially small nominee holdings (a parent on a child’s $5,000 bank account, for example). The threshold filters out the low-value arrangements and focuses the reporting on situations where the CRA’s beneficial-ownership concern actually has teeth.

The T3 return for a 2025 bare trust is due 90 days after the trust’s tax year-end. For a calendar-year trust, that’s March 31, 2026 (or the next business day if March 31 falls on a weekend or holiday).

Who actually has to file a bare trust T3?

The trustee of a bare trust with property exceeding $50,000 in total fair market value at any point during the year must file a T3 return. In a bare trust, the trustee is the person whose name is on the legal title while someone else is the beneficial owner.

The categories that come up most often:

Parent holding property for an adult child. A parent whose name is on the title to a condo, a brokerage account, or a bank account that belongs to their adult child. The parent is the bare trustee. The child is the beneficial owner. If the property’s value exceeds $50,000, the parent files a T3.

Joint tenancy with right of survivorship (JTWROS) that is really a bare trust. Two people hold a bank account or investment account in joint names, but one of them contributed all the money and both parties understand the other person is on the account only for convenience or estate planning. The non-contributing joint holder is, in substance, a bare trustee for the contributor. This is common with elderly parents adding an adult child to their bank account.

Real estate nominee arrangements. Someone buys a property but puts it in another person’s name (or a corporation’s name) for financing, privacy, or other reasons. The person whose name is on title holds it as bare trustee for the real buyer.

Corporate nominees. A corporation holds legal title to property on behalf of its shareholders or a related party. Common in commercial real estate.

Not every joint account is a bare trust, and the characterization depends on the actual legal relationship, not just whose name is on the account. If two people genuinely own property together and both contributed, that’s joint ownership, not a bare trust. The test is whether the legal titleholder has any beneficial interest or discretionary authority. If the answer to both is no, it’s a bare trust.

What does the T3 filing require?

The T3 return for a bare trust includes the standard trust income tax return plus Schedule 15 (Beneficial Ownership Information of a Trust), which requires disclosure of every trustee, beneficiary, and settlor.

Schedule 15 asks for the name, address, date of birth, jurisdiction of residence, and taxpayer identification number (SIN, ITN, or foreign TIN) for each person who is a trustee, beneficiary, or settlor of the trust during the tax year. For a bare trust, the trustee is the person on legal title, the beneficiary is the beneficial owner, and the settlor is typically the person who put the property into the arrangement (often the same person as the beneficiary).

Because a bare trust is look-through for income tax purposes, the income from the trust property is still reported on the beneficial owner’s personal return, not on the T3 itself. The T3 for a bare trust is an information return, not an income tax return. In most cases, the trust reports no income and pays no tax. The purpose of the filing is disclosure, not taxation.

That said, the filing still requires the trustee to obtain a trust account number from the CRA (if one hasn’t already been assigned), complete the T3 return including the trust information page, and attach Schedule 15. For a bare trust that holds a single bank account, the filing is straightforward but not optional.

What are the penalties for not filing?

Two penalty provisions apply. The base penalty for a late or unfiled T3 is $25 per day, with a minimum of $100 and a maximum of $2,500. A separate gross negligence penalty can reach 5% of the highest fair market value of the trust property during the year.

The base penalty under ITA 162(7.02) is $25 for each day the return is late, subject to a minimum of $100 and a maximum of $2,500 per return. Since the T3 is annual, each missed year carries its own penalty. Miss three years and the base penalties alone can reach $7,500.

The gross negligence penalty under ITA 163(6) applies where a person knowingly, or under circumstances amounting to gross negligence, fails to file the T3 return. The penalty is 5% of the highest total fair market value of the trust property at any time during the year. For a bare trust holding a $500,000 property, that’s $25,000. This penalty is assessed in addition to, not instead of, the $2,500 base penalty.

The gross negligence threshold matters. The CRA would need to establish that the trustee knew about the filing obligation and ignored it, or was so careless that the failure amounted to indifference. For the 2025 tax year (the first year the obligation applies), many taxpayers won’t know about the requirement, and ignorance of a new filing obligation is a more defensible position than ignorance of a long-standing one. That said, this is not a defense that gets stronger with time. By 2026 and 2027, “I didn’t know” becomes harder to sustain, especially for trustees with professional advisors.

How do joint accounts create bare trusts?

A joint account becomes a bare trust when one party contributed all the funds and the other is on the account in name only, without any real ownership interest. This is the scenario that catches the most people by surprise.

The classic case is an elderly parent who adds an adult child to their bank account or investment account so the child can help manage finances or so the account passes outside probate on the parent’s death. The child’s name is on the account, but the money is the parent’s. The child has no beneficial interest in the funds during the parent’s lifetime. In that arrangement, the child is a bare trustee, and starting with the 2025 tax year, the child (as trustee) must file a T3 return if the account value exceeds $50,000.

Not every joint account is a bare trust. If both parties contributed to the account and both have a genuine beneficial interest, it’s joint property, not a trust. The CRA has said it will look at the substance of the arrangement, not just the legal form. But in practice, the line can be blurry. Where one person contributed 100% of the funds and the other person’s name was added for convenience, the CRA’s position is clear: that’s a bare trust.

The JTWROS form of ownership adds a wrinkle. In a true JTWROS, each holder has an undivided interest in the whole, and the survivor takes the deceased’s share automatically. But if the joint tenancy was set up without the non-contributing party providing consideration, there’s a rebuttable presumption (under common law) that the contributing party intended a resulting trust, not a gift. The legal ownership is joint, but the beneficial ownership belongs entirely to the person who put up the money.

For cross-border families, this creates a compound problem. If the adult child added to the parent’s Canadian bank account is a US citizen or green card holder, the US reporting obligations covered later in this guide also attach.

What about real estate nominee arrangements?

Real estate held by a nominee is one of the primary targets of the bare trust reporting rules. If someone else’s name is on the title to your property, they’re your bare trustee, and they need to file.

Nominee arrangements for real estate are common in Canada for several reasons: financing (the buyer doesn’t qualify for a mortgage, so a family member takes title), privacy (the buyer doesn’t want their name on the land registry), or corporate structuring (a holding company is the titleholder while an individual is the beneficial owner). In each case, the person on title holds the property as a bare trustee.

The reporting obligation falls on the nominee (the person whose name is on title), not on the beneficial owner. The nominee, as trustee, files the T3 return and Schedule 15, disclosing themselves as trustee and the real owner as beneficiary. For a property worth more than $50,000 (which includes almost every piece of real estate in Canada), the filing is required starting in 2025.

One complication: many nominee arrangements are informal and undocumented. There’s no written trust deed, no nominee agreement, nothing on paper. The parties simply understand that one person holds title for the other. That informality doesn’t change the filing obligation, but it does make it harder to establish the terms of the arrangement, especially if the CRA or a provincial land titles office later questions who the real owner is. If you’re in a nominee arrangement for real estate, documenting the relationship in writing is worth the effort regardless of the T3 filing.

Are in-trust-for accounts caught too?

In-trust-for (ITF) accounts are the grey zone. Whether an ITF account is a bare trust, a formal trust, or no trust at all depends on the specific facts, not on what the bank’s account opening form says.

An ITF account is typically a bank or investment account opened in one person’s name “in trust for” another person, often a parent or grandparent for a minor child. The label suggests a trust relationship, but the legal reality varies. In some cases, the account holder intended to create a trust (and may have), while in others, the account holder simply wanted a way to save money for a child without creating any binding legal obligation.

The CRA treats the analysis as fact-specific. Where the three certainties of a common-law trust are present (certainty of intention, subject matter, and objects), the ITF account is a trust. Where the account holder retained full control, could withdraw the money at any time, and never intended to create a binding obligation, it’s not a trust at all, just a savings account with a label. And where the account holder intended the money to belong to the named beneficiary but retained bare legal title for convenience, it’s a bare trust.

For an ITF account that is a bare trust and holds more than $50,000, the account holder must file a T3 return with Schedule 15 starting in 2025. For an ITF account that is not a bare trust (because no trust was intended or because the account holder retained full discretion), no filing is required. The challenge is that many people who opened ITF accounts years ago never turned their minds to these distinctions, and the bank’s paperwork won’t resolve the question.

How does the US treat Canadian bare trusts?

The US doesn’t recognize bare trusts as a separate category. A bare trust is still a trust for US tax purposes under IRC 7701, and a US person who is a beneficiary of, or has a financial interest in, that trust may have US reporting obligations.

This is where cross-border families get caught. Canada says a bare trust is look-through: the beneficial owner reports the income directly, and the trust filing is for information only. The US says a trust is a trust. It doesn’t matter that the trustee has no discretion. It doesn’t matter that the Canadian tax treatment ignores the trust layer. If property is held by one person for the benefit of another under an arrangement that constitutes a trust under US law, the US treats it as a trust, and US-person beneficiaries or grantors have reporting obligations.

The key reporting forms are Form 3520 (Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts) and Form 3520-A (Annual Information Return of Foreign Trust With a US Owner). A US person who is treated as an owner of a foreign trust (including a Canadian bare trust) under the grantor trust rules must file Form 3520-A annually, and must file Form 3520 to report the trust ownership. A US person who receives distributions from a foreign trust must also report those on Form 3520.

The penalties for missed Forms 3520 and 3520-A are severe. The penalty under IRC 6677 can be the greater of $10,000 or 5% of the trust’s assets for each year the form is late. For a $200,000 bare trust, that’s $10,000 per year. The IRS did change its penalty procedures in late 2024 to review reasonable cause before automatically assessing these penalties, which helps, but the underlying obligation remains. The full analysis of the 3520 penalty change is at Form 3520 penalty abatement: the policy change.

The $100,000 threshold matters for Form 3520 purposes. A US person who owns or has authority over a foreign trust with assets exceeding $100,000 at any time during the year is required to file. For bare trusts under $100,000, the US reporting exposure is lower, though the obligation may still exist depending on the specific transactions.

Do bare trusts trigger Form 3520 or FBAR?

Yes, potentially both. A Canadian bare trust can trigger Form 3520/3520-A obligations (discussed above), and separately, the bare trust’s financial accounts may trigger FBAR (FinCEN Form 114) requirements for a US-person beneficiary.

The FBAR requires any US person with a financial interest in, or signature authority over, foreign financial accounts to file FinCEN Form 114 if the aggregate value of those accounts exceeds $10,000 at any time during the calendar year. A US person who is the beneficiary of a bare trust that holds a Canadian bank or investment account has a financial interest in that account under the FBAR rules. The $10,000 threshold is low enough that most bare trusts holding financial accounts will exceed it.

The FBAR question is separate from and in addition to Form 3520. A US-person beneficiary of a Canadian bare trust that holds a $300,000 investment account potentially needs to report that account on the FBAR (because of the financial interest through the trust) and report the trust relationship on Form 3520 (because it’s a foreign trust with US-connected persons). These are different forms filed with different agencies (FBAR with FinCEN, Form 3520 with the IRS) on different deadlines (FBAR by April 15 with automatic extension to October 15; Form 3520 with the income tax return).

This double (or triple) reporting burden is one of the strongest reasons to consider unwinding a bare trust arrangement when a US person is involved. The Canadian side now requires a T3 with Schedule 15, the US side may require Form 3520, Form 3520-A, and an FBAR, and the penalties on each side are independent of each other. The total compliance cost and risk for a simple nominee arrangement can become disproportionate to any benefit the arrangement provides.

For the broader US-Canada treaty analysis of how trust income is allocated between countries, the treaty generally follows the residence of the beneficiary for purposes of income taxation, but the reporting obligations run independently of the treaty’s substantive rules.

When should you unwind a bare trust?

If the bare trust arrangement serves no ongoing legal or tax purpose, unwinding it before the next filing deadline eliminates the compliance burden entirely. But not every bare trust should be unwound, and moving property out of a nominee arrangement can trigger its own tax and legal consequences.

Unwinding makes sense when the arrangement was set up for convenience and the original reason no longer applies. A parent who added their name to an adult child’s bank account 15 years ago “just in case” and now faces annual T3 filings (and possibly Form 3520 filings if the child is a US person) may be better off simply removing themselves from the account. If the parent has no beneficial interest and was never more than a nominee, transferring the legal title to the beneficial owner should have no income tax consequences on the Canadian side, because no change in beneficial ownership is occurring.

Unwinding gets complicated when real estate is involved. Removing a nominee from a property title may involve land transfer taxes (depending on the province), legal fees for title transfers, and potential mortgage complications if the property is financed. In Ontario, for example, a transfer of legal title, even where beneficial ownership doesn’t change, can trigger a land transfer tax assessment unless the parties can demonstrate that the transfer is between a bare trustee and the beneficial owner with no consideration. Documentation matters: a written nominee agreement contemporaneous with the original acquisition is far more persuasive than a retroactive declaration.

Continue the arrangement when it still serves a purpose. Corporate nominee arrangements for commercial real estate, for instance, often exist for financing or liability reasons that haven’t gone away. In those cases, the T3 filing is a cost of doing business. The same applies to nominee arrangements driven by mortgage qualification, where the person on title is there because the beneficial owner couldn’t get approved.

How can cross-border families plan ahead?

The best time to sort out bare trust reporting is before the filing deadline, not after a penalty notice arrives. For 2025, that means addressing the question now: is there a bare trust in the family, does it exceed $50,000, and are there US persons involved?

Start by inventorying the arrangements. Joint bank accounts where one person contributed everything, investment accounts held by a parent for a child, real estate in a nominee’s name, ITF accounts opened years ago. Each one needs a determination: is this a bare trust, and if so, what does it hold? That determination drives everything else.

If a bare trust exists and exceeds the threshold, the trustee needs a CRA trust account number (if one hasn’t already been assigned), and the T3 return with Schedule 15 must be prepared for the 2025 tax year. If there’s a US person involved, the Form 3520/3520-A and FBAR analysis needs to happen at the same time, not as an afterthought.

For arrangements where unwinding makes sense, do it before the tax year ends if possible. A bare trust that is unwound before December 31, 2025 (assuming a calendar year), never triggers the 2025 filing obligation. The $50,000 threshold is tested at any time during the year, so even one day of the arrangement existing with property over $50,000 creates the filing requirement for that year.

And if you’re creating a new arrangement, like adding a family member to a bank account or putting property in someone else’s name, think about the bare trust implications before you set it up. An arrangement that made sense before the reporting rules may not make sense now. The convenience of having a second name on the account may not be worth annual T3 filings, cross-border reporting, and penalty exposure on both sides of the border.

For families with exposure to both the Canadian T3 and the US foreign trust reporting regime, the filings need to be coordinated. A single engagement that covers both sides avoids the gaps that appear when one country’s preparer doesn’t know the other side’s obligations exist.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.