Can a Parent Hold Real Estate for an Adult Child as a Bare Trustee for Tax Purposes in Canada?

This answer covers Canadian federal tax law, which applies in every province.

A parent on title for an adult child can be a bare trustee, but a narrow reporting exclusion may apply. Under s. 150(1.31)(b), the deemed-trust rule does not apply where the legal owners are related individuals and the property is real property that would be the principal residence of one or more of them. CRA says this covers a parent on title to allow a child to obtain a mortgage. Related persons include those connected by blood relationship, marriage, common-law partnership or adoption.

If it is a bare trust, the parent holds legal title and the child is the beneficial owner. If it is a reportable bare trust, income, capital gains and capital losses from the property should be reported on the beneficial owner's return, not by the trustee on a T3. Ownership for the principal residence exemption includes beneficial ownership, but other conditions apply, so confirm how it applies with a lawyer or accountant.

Whether a bare trust exists is a question of fact, and the CRA cannot give definitive determinations on it. Records showing who pays, who lives there and who is meant to benefit are worth keeping, and a lawyer or accountant can help you document the arrangement.