What the Heck is a Bare Trust?
Happy Easter Monday, !
We hope you had a wonderful long weekend and were able to spend some time with your loved ones.
We had planned on writing this newsletter a couple of weeks ago to shed some light on bare trusts and the new tax rules affecting many Canadians. We reached out to a few tax accountants we know to get some opinions and information on who needs to file, what that looks like, and what to expect. However, the accountants were unclear, and we were left uncertain.
This past week, the CRA decided to push the requirement to file this new return because it appears that they were unclear about the requirements themselves.
So, if you don’t have to file this right now, why does it matter to you?
The CRA stated that in the coming months, they will be working with the Department of Finance to “further clarify its guidance on this filing requirement.” This means it’s coming. At this point, the CRA can still make a direct request for these filings if they so choose.
Let’s take a quick look at what a bare trust is and whether you need it and will eventually need to file a return.
From what we’ve found many firms are charging upwards of $1,000 to do this return. So, if you have set up a bare trust to save some probate down the line, this might negate any benefits. In the simplest form, a bare trust is when someone on title or holding an asset is not the true beneficial owner but rather holds the asset for another party. We see this often when a parent co-signs on a child’s home, a corporate bank account is opened by the shareholders, or when a child is joint on an elderly parent’s bank account.
Many times, situations like the ones I mentioned above are essential to create simplicity in the short term or accomplish many of the goals that you and your family have. Over the next few months, as the CRA tries to figure out who needs to fill out this additional paperwork, it might be worthwhile taking a look at any joint accounts you have and whether they are required. Although we might not have all the answers for you today, we are working closely with our accounting teams to make sure that when there are answers, we will have them for you.
Until next week, Happy Investing!
Trevor
