Does a family trust that just holds our cottage still have to file a T3 return every year?

Generally, yes. A family trust that holds a cottage is still a trust for tax purposes, and it's expected to file a T3 Trust Income Tax and Information Return every year for as long as it exists — even in a year the cottage sits quietly with no rental income and nothing is sold. Since federal trust reporting rules were expanded, most express trusts must also file a beneficial ownership schedule disclosing the trustees, beneficiaries, and settlor, regardless of whether the trust earned income that year, unless it fits a narrow exemption.

A cottage-holding trust rarely fits one of those exemptions — the common exemptions are aimed at things like trusts that have existed for only a few months, or trusts holding only nominal assets, not a trust holding a family property worth real money. Even where the cottage generates no rental income and the trust has no tax to pay, the filing obligation itself typically still applies.

Because this catches many families off guard — they assume "nothing happened this year" means nothing to file — a family cottage trust's trustees should confirm the filing requirement with an advisor annually and keep beneficiary information current, rather than treating a quiet year as a year off.