T3 Trust Returns and Bare Trust Reporting: Who Files and Who Is Exempt

On this page

• Where Bare Trust Reporting Stands for the 2026 Filing Season
• Which Trusts Must File a T3 Return
• Schedule 15: The Beneficial Ownership Information CRA Wants
• Bare Trusts Explained: Arrangements Most People Do Not Know They Have
• The Exceptions That Remove the Filing Requirement
• Deadlines, Penalties and the Gross Negligence Penalty Risk
• Graduated Rate Estates and the T3 for a Deceased Person
• Received a T3 Slip? What Each Box Means on Your T1
• Trust Income: Taxed in the Trust or Allocated to Beneficiaries
• FAQ: T3 Trust Returns and Bare Trusts
• Not Sure If You Hold Property in Trust? Book a 20 Minute Assessment

Where Bare Trust Reporting Stands for the 2026 Filing Season

If you are here because someone told you that being on title to your adult child’s condo makes you a trustee with a filing obligation, here is the current position.

For 2026 and later, that is expected to change. Draft legislation released in November 2025 would bring bare trusts into the reporting regime for tax years ending on or after December 31, 2026, with a set of new exemptions that would carve out most ordinary family arrangements. As of now that legislation is not yet law, so the position for 2026 is “prepare, do not panic.”

Everything else about the T3 regime is unchanged and has been in force since 2023. Express trusts that are not listed trusts file a T3 with Schedule 15, whether or not they had any income.

Let us untangle it.

 

Tax year	Bare trust filing required?
2023	No, relief announced
2024	No, relief announced
2025	No, confirmed by CRA in December 2025
2026	Expected yes, for years ending December 31, 2026 or later, if the draft legislation passes

The proposed rules also come with meaningful new exemptions, which matter more than the headline. A bare trust would not have to file where:

1. Every beneficiary is also a legal owner, and there is no legal owner who is not a beneficiary
2. The legal owners are related individuals and the real property could qualify as a principal residence of one of them
3. Total assets do not exceed $250,000, all trustees and beneficiaries are individuals, the beneficiaries are related to the trustees, and the holdings are limited to cash, GICs, listed securities, mutual funds, personal use property and certain life insurance
4. Total assets do not exceed $50,000, regardless of asset type
5. The trust existed for less than three months in the year

The draft would also widen the definition of related persons to include aunts, uncles, nieces and nephews.

What this means in practice. The classic BC situation, a parent added to title so a child can qualify for a mortgage, would likely fall inside exemption 2 or 3. But “likely” is doing real work in that sentence until the legislation passes, and the facts matter. Do not assume, and do not spend money restructuring anything before the rules are final.

 

Which Trusts Must File a T3 Return

Setting bare trusts aside, a T3 is required where the trust:

• Is a Canadian resident express trust that is not a listed trust, in which case it files whether or not it had income or activity
• Has tax payable for the year
• Disposed of capital property during the year
• Allocated more than $100 of income to a beneficiary
• Received a demand from CRA to file
• Is a deemed resident trust, or holds property subject to certain elections

The 2023 change was that middle group. Before then, a dormant trust with no income filed nothing. Now an express trust files annually to report who is involved, even when the financial statements would fit on a napkin.

 

Schedule 15: The Beneficial Ownership Information CRA Wants

Schedule 15 is the reason this regime exists. It asks for details on every reportable entity, meaning each:

• Trustee
• Settlor
• Beneficiary
• Controlling person, anyone with the ability under the trust terms to influence trustee decisions over the appointment of income or capital

For each one, you report:

Field	Notes
Name	Legal name
Address	Current
Date of birth	Individuals only
Country of residence	Not just Canada or not
Tax identification number	SIN, business number, trust account number or foreign TIN

The two practical problems that come up every year:

First, beneficiaries who cannot be individually identified, such as “my grandchildren, born or unborn.” The rules allow a description of the class where individuals cannot reasonably be ascertained, but the description has to be sufficiently detailed. This needs the trust deed in front of you, not a recollection of it.

Second, getting SINs from people who do not want to give them. Adult beneficiaries who have never received a distribution and did not know they were named are frequently unimpressed to be asked. Start that conversation in January, not in the last week of March.

 

Bare Trusts Explained: Arrangements Most People Do Not Know They Have

A bare trust exists where the legal owner of property holds it solely for someone else, with no independent discretion, acting only on that person’s instructions. Legal title sits with one person, beneficial ownership with another.

Common BC situations that are bare trusts, whether or not anyone wrote anything down:

Situation	Who holds what
A parent added to a child’s property title so the child qualifies for a mortgage, where the child pays everything	Parent holds legal title in trust for the child
An adult child added to a parent’s bank account or home title “for convenience” or estate planning	Child holds in trust for the parent
A nominee corporation holding real estate for the beneficial owner	Corporation holds in trust
A trustee holding shares of a private company for the true owner	Trustee holds in trust
A partner or director holding an asset on behalf of the business	Individual holds in trust
A parent holding an in trust investment account for a minor	Parent holds in trust, sometimes

There is no document requirement. A bare trust can arise from the facts alone. That is precisely why the 2023 rules caused such an uproar: hundreds of thousands of Canadians discovered they were trustees of something they had never heard of.

The tax treatment is unaffected. For income tax purposes the beneficial owner reports the income and the gains, not the legal owner. The reporting obligation is separate from, and does not change, who pays the tax.

 

The Exceptions That Remove the Filing Requirement

Under the rules already in force, these listed trusts do not file:

• Trusts in existence for less than three months at year end
• Trusts holding assets with a total fair market value not exceeding $50,000 throughout the year, provided the holdings are limited to money, certain government debt, listed securities, mutual fund units and certain annuities
• Small family trusts under $250,000 with individual trustees and related individual beneficiaries, holding only the permitted asset types
• Registered plans: RRSPs, RRIFs, TFSAs, RESPs, RDSPs, FHSAs and registered pension plans
• Registered charities and non profit clubs and associations
• Mutual fund trusts, segregated funds and master trusts
• Lawyers’ general trust accounts, though specific client trust accounts are treated differently
• Certain graduated rate estates and qualified disability trusts, under their own rules
• Cemetery care trusts and employee life and health trusts

Read the asset type restrictions carefully. The $250,000 exemption is not “any trust under $250,000.” Hold a piece of real property and the exemption is gone regardless of value.

 

Deadlines, Penalties and the Gross Negligence Penalty Risk

Deadline: 90 days after the trust’s tax year end. Most trusts have a December 31 year end, which puts the deadline at the end of March.

Penalties for late filing:

Situation	Penalty
Tax is payable	Standard late filing penalty: 5% of the balance plus 1% per month, up to 12 months
No tax payable	$25 per day, minimum $100, maximum $2,500
False statement or omission made knowingly or through gross negligence	The greater of $2,500 and 5% of the highest fair market value of all property held by the trust during the year

That last row is the one that matters. Five percent of the value of the trust property, not of the income and not of the tax. A bare trust over a $1.2 million Vancouver property, with a gross negligence finding, is a $60,000 penalty on a filing that would have reported no income at all.

CRA has said it will apply the gross negligence penalty only in the most egregious cases. That is a statement of administrative intent, not a rule, and it is why nobody sensible treats a required trust filing as optional.

Maxpro Financials prepares T3 returns and Schedule 15 filings for families, estates and holding structures across BC and Alberta, and the first thing we do is establish whether a filing is actually required, because very often it is not.

 

Graduated Rate Estates and the T3 for a Deceased Person

When someone dies, two different returns come into play.

The final T1 covers income to the date of death. That is the deceased individual’s last personal return.

A T3 covers income earned by the estate after death: interest, dividends, rent, and gains on assets sold during administration.

The estate can qualify as a graduated rate estate (GRE) for up to 36 months after death, which is a significant advantage:

	Graduated rate estate	Ordinary trust
Tax rates	Graduated, the same brackets an individual uses	Top marginal rate on the first dollar
Year end	Can choose a non calendar year end	December 31
Donation flexibility	Charitable donations by will can be allocated flexibly across years	Restricted
Duration	36 months from death	Ongoing

To qualify, the estate must designate itself as a GRE on its first T3, use the deceased’s SIN in that designation, and there can only be one GRE per deceased person.

Losing GRE status, usually by taking longer than 36 months to wind up the estate, means every dollar of estate income from that point is taxed at the top rate. That is a real reason to keep an estate administration moving.

 

Received a T3 Slip? What Each Box Means on Your T1

Box	What it is	Where it goes
21	Capital gains	Schedule 3
23	Actual amount of non eligible dividends	Used to compute box 32
25	Foreign non business income	Line 12100
26	Other income	Line 13000
30	Capital gains eligible for the deduction	Schedule 3
32	Taxable amount of non eligible dividends	Line 12000
33	Foreign business income	Line 13500 area
34	Foreign non business income tax paid	Foreign tax credit, Form T2209
39	Dividend tax credit, non eligible	Line 40425
42	Amount resulting in a cost base adjustment	Not income. Reduces the ACB of your units
49	Actual amount of eligible dividends	Used to compute box 50
50	Taxable amount of eligible dividends	Line 12000
51	Dividend tax credit, eligible	Line 40425

Box 42 is the one people get wrong, exactly like box 113 on a T5013. It is a return of capital, not income. You reduce the adjusted cost base of your units by that amount. Ignore it for a decade and you will understate your capital gain when you sell.

 

Trust Income: Taxed in the Trust or Allocated to Beneficiaries

A trust is a separate taxpayer, and income can be taxed in one of two places.

Taxed in the trust. Income retained in the trust is taxed at the trust’s rate. For an inter vivos trust or a testamentary trust that is not a GRE, that is the top marginal rate from the first dollar, which in BC means roughly 53.5% on ordinary income. There are no graduated brackets and no personal credits.

Allocated to beneficiaries. Income paid or payable to a beneficiary in the year is deducted by the trust and taxed in the beneficiary’s hands at their own rate. Where it is designated properly, the character is preserved: capital gains stay capital gains, eligible dividends stay eligible dividends.

Because trust rates are punitive, the normal planning is to allocate income out to beneficiaries in lower brackets. Two things constrain that:

• Subsection 75(2) can attribute income back to the person who contributed the property, in certain trust structures
• TOSI, the tax on split income, can tax dividends and certain other amounts allocated to family members at the top rate regardless of their own bracket

Which is to say: a family trust that made obvious sense before 2018 may not make the same sense now, and it is worth having the structure looked at rather than assumed.

 

FAQ: T3 Trust Returns and Bare Trusts

Do bare trusts have to file for 2025? No. CRA confirmed in December 2025 that bare trusts were not expected to file a T3, including Schedule 15, for the 2025 tax year.

Will they have to file for 2026? Probably, for years ending December 31, 2026 or later, if the draft legislation from November 2025 passes. New exemptions would exclude many ordinary family situations.

I am on my child’s mortgage but do not live there. Is that a bare trust? Very likely yes on the facts. Whether it requires a filing depends on the final version of the rules and the proposed exemptions.

When is a T3 due? 90 days after the trust’s year end, so end of March for a December 31 year end.

What is the penalty for not filing a T3? $25 per day, minimum $100 and maximum $2,500 where no tax is owing, or the standard late filing penalty where tax is owing. A gross negligence finding costs the greater of $2,500 and 5% of the trust’s property value.

Do I need a trust account number? Yes, to file. Apply early, because it takes time to obtain.

Does a bare trust pay tax? No. The beneficial owner reports the income and the gains on their own return. The filing obligation is separate from the tax.

What if a beneficiary refuses to give me their SIN? Document your reasonable efforts. The obligation is to make them, and CRA’s approach to a well documented failure differs from an unexplained blank.

How long can an estate use graduated rates? Up to 36 months from the date of death, if it qualifies and designates itself as a graduated rate estate on its first T3.

What do I do with box 42 on my T3 slip? Reduce the adjusted cost base of your units. It is not income and it does not go on an income line.

 

Not Sure If You Hold Property in Trust? Book a 20 Minute Assessment

The most common outcome of a trust reporting review is relief: the arrangement either is not a trust at all, or falls inside an exemption. The second most common outcome is a straightforward filing. The expensive outcome, a gross negligence penalty measured against the value of the property, only happens to people who never looked.

Maxpro Financials reviews ownership and title arrangements for families and business owners across BC and Alberta, tells you plainly whether a T3 and Schedule 15 are required, and prepares the return when they are. If you were added to a title or an account for someone else’s benefit, or you hold anything as a nominee, that is a twenty minute conversation worth having before the 2026 rules land.

Book a consultation or call BC +1 (778) 951 1269 / Alberta +1 (403) 437 6016.