Bare Trust Agreements for Property in Ontario: How They Work

Sometimes the name on title is not the person who really owns the property. A parent may go on title so a child can qualify for a mortgage, or a friend may hold a property for someone else. A bare trust agreement is the document that records who actually owns the property and what the person on title may do.

This article explains the idea in plain terms, what a written agreement usually addresses, and the tax reporting and registration points to know about. Details vary, so a lawyer or accountant should confirm what applies to you.

What a bare trust is

In a bare trust, the person on title holds the property for someone else. CRA describes a bare trust as one where the trustee is essentially an agent for the beneficiaries. The trustee has little or no real control. The beneficiary is the true owner in substance.

There is no statutory checklist of what a bare trust agreement must contain. It is mostly a contract matter, which is why a clear written document matters so much.

What a written agreement should address

Without a written agreement, disputes about who owns what tend to turn on memory and scattered evidence. A good agreement usually covers the following.

• Who the registered owner (trustee) and the real owner (beneficiary) are, and a clear description of the property.
• That the trustee holds the property for the beneficiary and acts on the beneficiary's instructions.
• Who pays the mortgage, property tax, insurance and repairs, and who receives any income or sale proceeds.
• What happens if the trustee dies, becomes incapable, divorces, or has creditors.
• How and when title will be transferred to the beneficiary or sold, and who bears the costs.
• How the trust can be ended.

Questions about creditors, spouses and incapacity are where problems often appear, so they are worth raising with a lawyer while everyone still agrees.

CRA trust reporting

Trust reporting rules have been changing. Bare trusts do not have to file a T3 return or Schedule 15 for taxation years ending on or after December 31, 2024 and before December 31, 2026. For years ending on or after December 31, 2026, reportable bare trusts may have to file. CRA has described these as proposed changes it is administering, so check its current position before relying on this.

Whether an exclusion fits your case depends on the details, so confirm with an accountant.

Registration and transfers of title

Putting a property into, or taking it out of, someone's name usually means registering a transfer of title. In Ontario's electronic land registration system, only a lawyer may sign for completeness a document that requires compliance with law statements, and most transfers contain such statements. Generally, a transfer must be signed for completeness by two different lawyers, one for each side. Some transfers, such as those within a family or between related parties, may be completed by one lawyer acting for both sides under the Law Society's professional standards.

Whether a particular transfer into or out of a bare trust triggers land transfer tax or other costs depends on the facts, so ask before you sign anything.

What to do next

• Write down who really owns the property, who pays for it and why title is in another name.
• Have a lawyer prepare a written agreement before or as title is registered, not years later.
• Ask an accountant whether the trust is reportable for CRA purposes in the years that matter to you.
• Plan for death, incapacity and separation of the person on title.
• Keep copies of the agreement, payment records and title documents in a safe place.

Frequently asked questions