**Since the publishing of this article, CRA has announced that bare trusts are exempt from new filing requirements for 2023 due to the unintended impact on Canadians.**

We are receiving many inquiries from clients regarding this matter and there is much ambiguity as to CRA’s definition of a bare trust and what that means for Canadians.

In this edition of Our Two Cents, we explore this new requirement while keeping in mind this topic is evolving.

What is a Bare trust?

A bare trust means a trust where the trustee has legal ownership of the property but has no other duties, obligations, and responsibilities with respect to the property as trustee other than to deal with trust property as instructed by the beneficiary.

In plain English, a bare trust may exist when someone holds legal title to an asset but some or all of the assets belong to someone else. A bare trust can result by simply adding someone’s name to an account or to the ownership of a real estate property.

Most Common Bare Trusts

If your parent has added you to their bank account, investment account or real estate for estate planning purposes, you may have a bare trust.

If you thought you were helping your children or grandchildren to start investing and are listed as a joint bank or investment account holder, you may have a bare trust.

If you helped your children purchase a house/condo and are on title and mortgage, you may have a bare trust.

Exemption of a Bare Trust

Where an account has a value of $50,000 or less, there is a filing exemption, and no trust return is required.

Alternative Solution

RBC Dominion Securities may offer an option, Joint Gift of Beneficial Right of Survivorship (JGBRS) account. For a bare trust to exist, you would need to pass legal title of the assets to your agent (you would maintain beneficial ownership) and they would be responsible for returning legal title back to you at your request. With the JGBRS arrangement, legal title to the assets remains with the accountholder. Only the beneficial right of survivorship is gifted. On the accountholder’s death, RBC passes legal and beneficial ownership of the assets to the successor accountholder(s).

Why is Bare Trust Filing Required?

The new bare trust filing requirements were introduced into the Federal Budget in 2018 so CRA can identify the owners of trusts and help to counter tax avoidance, tax evasion and money laundering.

Ultimately, your tax advisor would be able to speak about your particular joint accounts and whether they can be considered bare trusts and whether a tax return would be required to be filed.

RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. ® / ^TM Trademark(s) of Royal Bank of Canada. Used under licence. © 2023 RBC Dominion Securities Inc. All rights reserved