Bare Trusts in Canada: What Every Professional Should Know in 2025

In today’s complex financial landscape, understanding the nuances of legal and tax structures is essential for professionals managing assets, investments, or estate plans. One such structure that often flies under the radar but can have significant implications is the bare trust. If you’re involved in property ownership, investment holding, or family wealth management in Canada, bare trusts deserve your attention.

What Exactly Is a Bare Trust?

At its simplest, a bare trust is a legal arrangement where one party the trustee holds assets on behalf of another the beneficiary. Unlike other trusts, the trustee has no discretionary power and must act strictly on the beneficiary’s instructions. The beneficiary retains full beneficial ownership and can demand the property at any time.

This structure is sometimes called a “nominee trust” or “simple trust” and is prized for its transparency and minimal administrative burden. It’s commonly used in real estate transactions, investment holdings, estate planning, and business structuring where legal and beneficial ownership need to be separated but with straightforward management.

Why Are Bare Trusts Relevant Now?

Recent changes in Canadian tax reporting have thrust bare trusts into the spotlight. The Canada Revenue Agency (CRA) has updated filing requirements, temporarily exempting bare trusts from certain tax return filings for 2023 and 2024, but signaling that reporting obligations will resume in 2025 with some exemptions. This evolving regulatory environment means trustees and beneficiaries must stay informed to avoid costly mistakes.

How Does a Bare Trust Work in Practice?

Imagine a family holding a property for a minor child. The parent acts as trustee, holding legal title but managing the asset solely for the child’s benefit. The child, as beneficiary, enjoys all rights to income or capital gains and must report these on their tax return. The trustee cannot act independently selling or mortgaging the property requires the beneficiary’s consent.

This clarity of roles makes bare trusts attractive for straightforward asset management, but it also places responsibility squarely on beneficiaries for income reporting and tax compliance.

Tax Implications: What You Need to Know

  • Income and Capital Gains Flow Through: Unlike discretionary trusts, bare trusts do not pay taxes themselves. All income and capital gains flow directly to the beneficiary, who must report them on their personal or corporate tax returns.

  • Filing Requirements: Trustees typically do not file trust tax returns unless specifically requested by the CRA. However, they must maintain clear records to demonstrate the trust’s nature if audited.

  • Temporary Exemptions: The CRA’s recent announcements provide relief for 2023 and 2024 tax years, exempting bare trusts from filing T3 returns and Schedule 15 (Beneficial Ownership Information), but this relief is temporary.

  • Exemptions and Planning Opportunities: Certain exemptions apply, especially when trust property consists of principal residences or prescribed investments among related parties. Leveraging these can optimise tax outcomes but requires professional guidance.

Bare Trusts vs. Other Trusts: Why Simplicity Matters

Bare trusts differ fundamentally from discretionary or family trusts, where trustees have broader powers over income distribution and asset management. The transparency and direct beneficial ownership in bare trusts reduce complexity and compliance burdens, making them ideal when simplicity and clarity are priorities.

However, they lack the flexibility that some families or businesses might need for income splitting or asset protection.

Practical Tips for Trustees and Beneficiaries

  • Always formalise the arrangement with a clear, signed bare trust agreement to avoid misunderstandings and legal risks.

  • Keep detailed records of all transactions and communications related to the trust assets.

  • Beneficiaries must be diligent in reporting income and capital gains.

  • Consult tax and legal professionals to navigate exemptions and evolving CRA requirements.

Looking Ahead: Regulatory Changes and What They Mean

The Office of the Taxpayers’ Ombudsperson recently criticized the CRA for late communication on bare trust filing exemptions, highlighting the challenges taxpayers face amid sudden regulatory shifts. Staying proactive and informed is crucial as reporting requirements are expected to resume in 2025, albeit with some relief for low-value trusts and related-party arrangements.


Why This Matters to You

Whether you’re advising clients, managing family wealth, or structuring business assets, understanding bare trusts is vital in 2025. They offer a streamlined way to separate legal and beneficial ownership, but come with distinct tax responsibilities and compliance nuances.

Navigating these complexities confidently can save time, reduce risk, and optimise financial outcomes.

For a deeper dive into bare trusts, including real-world examples, detailed tax implications, and practical advice, I invite you to read the full blog on our website.

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