Is a Mortgage Co-Signer on Title a Bare Trustee in Canada?

Many parents agree to go on title, and co-sign the mortgage, so a son or daughter can buy a home. Then a tax preparer or an article online mentions "bare trust" and "T3", and it is fair to wonder whether you have a new tax filing obligation.

The short answer is that it depends on the facts, and there is a specific exception that CRA says covers a parent on title to allow a child to obtain a mortgage. This article explains what a bare trust is, how the exception works, what changes in 2026, and what to check.

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

What a bare trustee is

The Income Tax Act does not define "bare trust". CRA uses the term for an arrangement where the trustee acts as agent for all of the beneficiaries, and such an arrangement is generally treated as not being a trust for the Act's purposes, with some exceptions.

A trustee generally qualifies as an agent when the trustee has no significant powers, cannot act without the beneficiary's instructions, and only holds legal title. In that case the beneficiary is the beneficial owner and the trustee is the legal owner.

Being on title or on the mortgage does not automatically answer the question. Whether a bare trust exists is a question of fact, and CRA suggests consulting a legal advisor if you are unsure.

Why the rules reach arrangements like yours

Section 150(1.3) of the Income Tax Act says that, for section 150 purposes, an express trust includes an arrangement where a legal owner holds property for the use or benefit of others and can reasonably be considered to act as their agent. The legal owner is deemed a trustee and the others are deemed beneficiaries.

CRA calls this a reportable bare trust, and it includes an arrangement that would not otherwise be considered a trust under the Act. That is why a parent who is on title only to help a child qualify for financing is a natural question.

The exception for a home that is someone's principal residence

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.

For this purpose, related persons include individuals connected by blood relationship, marriage, common-law partnership or adoption. CRA's material does not give an adult child on title as a separate example, so if your situation is different from the usual one, ask for advice.

Other exceptions exist too. One applies where every beneficiary is also a legal owner and no legal owner is a non-beneficiary, such as a joint bank account held by family members for each of their use and benefit. Another covers an individual who holds real property for a spouse or common-law partner if it would be the owner's principal residence.

• Everyone who is a legal owner of the home is a related individual, and the home would be the principal residence of one or more of them.
• Whether the arrangement is a bare trust at all is a question of fact, so the details of who holds title for whom matter.
• How this applies to your own home depends on your situation, so it is worth confirming with a lawyer or accountant.

If you are a reportable bare trust

For taxation years ending in 2025, CRA does not expect bare trusts to file a T3 return, including Schedule 15. Reportable bare trusts are subject to the trust reporting rules for taxation years ending on or after December 31, 2026, so the first returns are for the 2026 year and are due 90 days after year-end, which is March 31, 2027 for a December 31, 2026 year-end.

Income, capital gains and capital losses from the trust property should be reported on the beneficial owner's tax return, not on a T3 by the trustee. If a T3 is filed for a reportable bare trust, only the fields CRA marks need completing.

The principal residence exemption is a separate topic. CRA's folio treats ownership as including being a beneficial owner, alone or jointly, so the beneficial owner behind a bare trust can look to the exemption. The exemption has further conditions that depend on how the home is used, so confirm them for your own facts.

A late-filing penalty where no tax is unpaid is $25 a day, with a minimum of $100 and a maximum of $2,500, and a bare trust usually has no tax payable.

What to do next

• Find your title documents and mortgage papers and note who is on each.
• Write down who lives in the home, who pays the costs, and who is meant to own it.
• Check whether everyone on title is related and whether the home would be the principal residence of one of them.
• Keep any written agreement between you and your child.
• Ask a lawyer or accountant to confirm whether a bare trust exists, since it is a question of fact.

Check CRA's current trust pages before relying on any older summary, because the legislation behind the 2026 changes received royal assent on March 26, 2026.

Frequently asked questions