What Is a Bare Trust in Canada? A Plain-Language Explanation

You may have come across the term "bare trust" when a lawyer, banker or accountant mentioned it, or when reading about new tax reporting rules. It sounds technical, but the basic idea is simple: one person's name is on an asset, while someone else is the real owner.

This article explains in plain words what a bare trust is, how one arises, who the people involved are, and where the Income Tax Act and the Canada Revenue Agency (CRA) fit in. Whether a bare trust exists in your situation depends on the facts, so treat this as general information.

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

A plain definition of a bare trust

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 purposes of the Act, with some exceptions.

Put simply, the trustee is a name on the title and nothing more. The trustee holds the asset, but the beneficiary is the one who owns it in substance and gives the instructions.

Who the trustee and beneficiary are

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

A settlor is the person who set up a trust by contributing property. In a bare trust, the settlor and the beneficiary are often the same person or closely connected, but this depends on how the arrangement was set up.

How a bare trust differs from a regular trust

Resident express trusts that are not listed trusts must file a T3. Bare trusts have been treated differently, as the next sections explain.

How a bare trust arises and common examples

A bare trust can arise without anyone using the word "trust". The Income Tax Act says that, for section 150, 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 users or beneficiaries are deemed beneficiaries.

Some arrangements are excluded from that deeming rule. Examples include:

• A joint bank account where every beneficiary is also a legal owner and no legal owner is a non-beneficiary, such as an account held by family members for the use and benefit of each of them.
• Real property held by related individuals where it would be the principal residence of one or more of them, which CRA says covers a parent on title to allow a child to obtain a mortgage.
• An individual holding real property for a spouse or common-law partner where it would be the owner's principal residence, such as spouses living in a family home with only one on title.
• Property held solely for a partnership by its partners where a partnership return is filed, and property a court order requires the legal owner to hold.

Whether a bare trust exists is a question of fact. CRA says it cannot give definitive determinations on whether a trust exists and suggests consulting a legal advisor if you are unsure.

Tax treatment and reporting timelines

For a reportable bare trust, all 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. For the principal residence exemption, ownership includes being a beneficial owner, alone or jointly with another person, so the beneficial owner behind a bare trust can look to the exemption. The exemption has further conditions that depend on your facts.

On reporting, the CRA does not expect bare trusts to file a T3 return, including Schedule 15, for taxation years ending in 2025. Bare trusts are not subject to the trust reporting rules for taxation years ending on or after December 31, 2024 and before December 31, 2026. Reportable bare trusts are subject to the rules for taxation years ending on or after December 31, 2026, so the first returns are for the 2026 year, due 90 days after year-end, which is March 31, 2027 for a December 31, 2026 year-end.

Bill C-15 received royal assent on March 26, 2026, and the Act contains the new s. 150(1.3) and (1.31). Some older CRA pages may still describe these changes as proposed, so it is sensible to confirm current wording.

What to do next

• List any property where someone's name is on title but another person is really the owner.
• Gather the documents showing who pays for the property, who gets the income and who gives instructions.
• Check whether one of the exclusions applies, such as a joint account or a principal residence held by related individuals.
• Note the year-end of any arrangement that may be a reportable bare trust, since reporting is tied to year-ends on or after December 31, 2026.
• Speak with a lawyer or accountant if you are unsure whether you have a bare trust, because it turns on the facts.

Frequently asked questions