There have been some important updates to how certain types of trusts, called "bare trusts," will need to be reported on your taxes in the coming years. These changes can be confusing, so we want to help you understand what’s going on and what it means for you.
Big News: No Filing Needed for 2024
If new rules from the government go through, you won’t need to worry about filing tax forms for bare trusts in 2024. This change is meant to give people more time to prepare before the new rules kick in for the 2025 tax year. It’s a big relief for many, especially after all the confusion earlier this year.
Who Will Need to File and Who Won’t?
The new rules are designed to make things easier for most people. Here are some key points:
- Family Trusts: If all the people involved in the trust (like trustees and beneficiaries) are related and the trust is worth less than $250,000, you won’t need to file tax forms. This is great news for small family trusts and estates.
- Common Assets: Trusts that only hold common assets like cash, GICs, mutual funds, and publicly traded stocks won’t need to file, as long as the total value is under $250,000. This could include situations where an adult child is added to a parent’s bank account to help manage their money.
- Smaller Trusts: If your trust is worth less than $50,000, you’re also off the hook for filing, no matter what kinds of assets the trust holds. This is a change from the old rules and makes things a bit simpler.
These new rules will start applying to trusts with year-ends after December 31, 2024, giving you some time to get ready.
Homes and Family Arrangements
One of the helpful changes is that if you put an adult child or parent on the title of your home, which you live in as your main residence, you won’t need to file a trust tax form. This change is aimed at making things easier for families who have these kinds of arrangements. This rule will apply to trusts with year-ends after December 31, 2025.
What Is a Bare Trust, Anyway?
A bare trust is a simple kind of trust where one person (the trustee) holds property for someone else (the beneficiary). In many cases, these trusts are used for things like estate planning or keeping things private, but they can also be used to avoid taxes. That’s why the government is now requiring more of these trusts to file tax forms.
Under the new rules, many bare trusts will need to file a T3 tax return each year and provide details about everyone involved in the trust. This could include their names, addresses, and social insurance numbers.
Why This Matters
If you don’t follow the new rules, the penalties can be steep. You could be fined up to $2,500, or even more if the trust is worth a lot of money. That’s why it’s so important to know whether your trust needs to file a tax return or not.
How Brant Financial Group Can Help You
We know that all of this can be confusing. That’s why we’re here to help. At Brant Financial Group, our team of financial advisors is ready to guide you through these changes and make sure you’re doing everything right.
Whether you have a family trust, a bare trust, or just want to know how these new rules might affect you, we’re here to offer clear, simple advice that’s easy to understand.
What’s Next?
These changes won’t fully take effect until the 2025 tax year, so you have some time to get ready. But it’s always a good idea to plan ahead. If you have any questions or need help figuring out what to do next, give us a call. We’re here to help you navigate these new rules and keep your finances on track.
