In my last series of blogs, I gave a brief overview of the new trust reporting rules that have recently come into effect. The new reporting rules appear to be very broad, and by including bare trusts, they result in a number of relationships now being captured by the requirement to report. A recent article by Global News, titled “Did you co-sign your kid’s mortgage? There are new tax reporting rules to know” is an example of just one way that Canadians may not realize they are a trustee or beneficiary of a trust.1 There are other surprising instances which constitute trusts under the new reporting rules, including bank accounts for minor grandchildren opened by the grandchild’s grandparents.
Since writing my earlier blog in early January, 2024, the CRA has provided more guidance regarding the exceptions to these new rules, which is a benefit considering the breadth of trusts that seem to be included in the new reporting rules. Guidance on the exceptions can be found in section 150(1.2) of the Income Tax Act.
The general rules regarding the exceptions include the following types of trusts:
- Trusts that came into existence less than three months prior to the end of the year;
- Trusts with assets of a fair market value equal to or less than $50,000.00 if the only assets are:
- Money;
- a debt obligation that has been in existence for less than three months prior to the end of the year or that is except as per subsection 212(3) of the Income Tax Act;
- a share, right, or debt obligation listed on a designated stock exchange, or beneficiaries interests in a trust where all the units are listed on a designated stock exchange;
- a share of a capital stock of a mutual fund corporation or a unit of a mutual fund trust; and
- interests in segregated fund trusts that are considered to be related as per section 138.1(1)(a).
- Trusts that are required under various professional conduct rules or the laws of Canada or a province to hold funds for the regulated activity, provided that it is a general trust and not one maintained as a separate trust for a particular client;
- Trusts that are regulated charities;
- Trusts that are clubs, societies, or associations described in section 149(1)(l) of the Income Tax Act;
- Mutual fund trusts;
- Regulated segregated fund trusts as defined by section 138.1(1)(a);
- Trusts where all the units are listed on a designated stock exchange;
- Trusts that are prescribed to be a master trust;
- Trusts that are graduated rate estates;
- Qualified disability trusts, as defined by subsection 122(3) of the Income Tax Act;
- Employee life and health trusts;
- Trusts described under section 81(1)(g.3) of the Income Tax Act;
- Cemetery care trusts or trusts governed by certain funeral arrangements; or
- A trust governed by:
- A deferred profit-sharing plan;
- A pooled registered pension plan or a registered pension plan;
- A registered disability or education savings plan;
- A registered retirement income fund or a registered retirement savings plan;
- A tax-free savings account;
- An employee profit-sharing plan;
- A registered supplementary unemployment benefit plan; or
- A first home savings account.
Additionally, the CRA has clarified that the trust reporting rules do not require the disclosure of information that is subject to solicitor-client privilege.
As seen from this comprehensive list, there are many more exceptions to the rules than it originally looked like there would be. However, keeping track of whether or not there are reporting requirements on a given trust will be a fact-specific exploration. Seeking tax and trust advice from a lawyer is a good idea for any party who is unsure whether or not a specific trust, relationship, or bank account is subject to the new reporting rules.