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, the law requires most trusts to file an annual T3 tax return. This applies even to trusts that previously did not need to file. 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 the CRA exempted Bare Trusts 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, you might add an adult child to your home’s title for estate planning while you retain control. The CRA may consider this a bare trust. In that case, these new rules apply to you.

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 your trust needs to file, or if your informal arrangements meet the criteria for a trust, speak with an estate planning professional now.

Managing these new trust reporting in Canada is just one part of a robust financial strategy. To ensure your assets remain protected and compliant with all current tax laws, you can explore our comprehensive estate planning in Ontario.