Estate planning in Canada just went through an upgrade in transparency. As of the 2023 tax year, most trusts must now file a T3 return every year and disclose details about trustees, settlors, and beneficiaries. These Canada trust reporting changes apply to formal estate trusts and informal arrangements, including bare trusts, which received a temporary filing exemption for 2024.
The change was introduced under the Canadian Income Tax Act to expand reporting requirements and provide the Canada Revenue Agency with full trustee and beneficiary visibility.
These updates affect estate planning inside Canada, but also apply to non-residents connected to Canadian trusts, making cross-border compliance an increasing concern for families with ties to both Canada and the U.S.
What’s New?
The expanded trust reporting rules now require disclosure of all key roles in a trust, including trustees, settlors, beneficiaries, protectors, and anyone with the ability to influence trust decisions. Reported details include names, addresses, birth dates, and taxpayer identification numbers such as SINs or business numbers.
The penalty for skipping a trust filing in Canada can be up to $2,500. If the Canada Revenue Agency believes the missed return was intentional, they can also charge 5% of the highest value of the trust’s assets for that year. Trust transparency reforms stem from global firm-ups in beneficial ownership tracking, influenced by initiatives such as the OECD Common Reporting Standard and recommended Financial Action Task Force frameworks.
Canada aligned its system to strengthen financial crime deterrence and increase data sharing capabilities with international tax partners, including the Internal Revenue Service for cross-border trust beneficiaries.
What is a “Bare Trust”?
A Bare Trust is a legal arrangement where the trustee holds title or ownership of an asset but exercises no independent control. The real decision-maker and beneficial owner directs all actions. The classic estate planning example is adding an adult child to property title for inheritance ease, while the parent continues controlling the asset. Many Canadians unknowingly create Bare Trusts this way.
The T3 Trust Income Tax and Information Return reporting update put a spotlight here, and thousands of Canadians filed for the first time in 2023 as a result. The CRA issued alerts after identifying sharp reporting gaps in asset-title transfers meant for future inheritance.
Canada included bare trust reporting in the 2023 rules. Later, the Department of Finance – Canada announced a one-year exemption for the 2024 tax year. That means bare trusts don’t need to file a T3 return for 2024. Other trusts still must file every year. This exemption is temporary and doesn’t change how the law defines bare trusts, and it doesn’t promise the same break in future years.
Why This Matters
The new trust reporting changes in Canada apply to a larger demographic than most realize. This reform shifts estate planning from a “high-net-worth issue” into everyday cross-border tax compliance. Canadians living in the U.S., green card holders, dual citizens, and families with U.S. beneficiaries must be especially careful.
The U.S. taxes based on citizenship and residency status and has its own information returns such as the IRS Form 3520 for beneficiaries and the IRS Form 3520‑A for foreign trusts with a U.S. owner. If you’re a non-resident connected to a Canadian trust, your estate plan may now carry filing obligations in both countries, depending on the beneficiary and owner profile.
What Should You Do?
Start by determining whether the arrangements in your estate plan include a formal trust, an estate trust, or a Bare Trust that may require future reporting. Even with the 2024 exemption for Bare Trusts, this remains a moving target. If you filed a T3 for 2023, you should prepare to assess filing requirements again for 2024. If you have U.S. beneficiaries, you may also need to review Form 3520 or 3520-A obligations in the U.S.
Failing to file U.S. foreign trust forms can result in penalties starting at 35% of distributions received, or 5% of trust assets for 3520-A non-filing. Families with cross-border ties should consider professional review from both a Canadian estate planning specialist and a cross-border tax advisor experienced in Canada-U.S. reporting alignment.
If you’re mapping an estate strategy, start with the fundamentals in Introduction to Some Canadian Tax Basics. For non-resident families holding Canadian real estate or rental income inside trusts, the stress points and tax overlaps are unpacked in Non‑Resident Tax Issues Likely to Affect Canadian Trusts.