Do informal family arrangements create a trust that needs to be reported for tax in Ontario?

This is an area where Canada's tax rules have been evolving. A bare trust exists when one person (the trustee) holds legal title to property for the benefit of another (the beneficiary) with no active duty to manage — common examples include parents holding accounts for adult children, jointly-held real estate where one party is on title purely for financing, and agency arrangements. For many years, bare trusts were not required to file T3 trust returns.

The CRA has proposed expanded trust reporting rules that would require bare trusts to file T3 returns disclosing the arrangement and all parties involved. The implementation of these rules has faced changes and delays, and the CRA has in some years exempted certain bare trusts from the new requirements at the last moment. The current state of the rules should be confirmed with a tax professional or the CRA's current guidance, as this area remains in flux.

If you have an informal arrangement — a joint bank account, a property held in one family member's name for another, or a nominee arrangement — it is worth reviewing whether a T3 filing obligation applies. Ontario residents face the same federal trust reporting rules as all Canadians; there is no separate provincial trust return regime for bare trusts. Failure to file when required can result in penalties.