Please see the first part in our previous post.
STEP 1: Does a bare trust arrangement exist?
To determine if a bare trust arrangement exists, the following question should be asked:
- Is the person on title or holding the asset the true beneficial owner? For example, do they get the benefits of the asset (such as sale proceeds) and bear the costs or risks of the asset (such as property taxes)?
There is likely a bare trust arrangement if there is a mismatch between legal and beneficial ownership, often requiring a trust return.
There are several reasons why an individual, business or organization may use a bare trust arrangement. Many parties involved in a bare trust arrangement may not realize that they are, much less that there may be a filing requirement with CRA. No lawyer may have ever been involved, and no written agreement may have ever been drafted.
While there are countless possibilities of bare trust arrangements, the following lists some common potential examples.
Individual Reasons
- a parent is on title of a child’s home (without the parent having beneficial ownership) to assist the child in obtaining a mortgage;
- a parent or grandparent holds an investment or bank account in trust for a child or grandchild;
- one spouse is on title of a house or asset although the other spouse is at least a partial beneficial owner;
Estate Planning Reasons
- a child is on title of a parent’s home (without the child having beneficial ownership) for probate or estate planning purposes only;
- a child is on parent’s financial accounts (or other assets) to assist with administration after the parent’s passing
Find out about the steps in our next posts.
*The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions, a further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this text accepts any contractual, tortious, or any other form of liability for its contents.
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