TRUST TAX TROUBLE

TRUST TAX TROUBLE

It is tax season and a new wrinkle to consider is the change by CRA to trust reporting. The change appears to be that even "bare" trusts must file a tax return even if there was no income. A Bare Trust can be created as easily as you being added to your parent's bank account to help pay their bills because a trust is created when a person has ownership of an asset but the benefit belongs to a different person. So if you are added to the title of an asset, including joint tenancy, but the benefits belong to someone else then you could be deemed to be a trustee. The tax issue is that CRA now says you have to file a trust tax return even if there was no income, let alone no taxable income, being generated such as when you are added to the title of real estate. The Financial Post published an opinion about this unnecessary trouble caused by CRA: https://www.msn.com/en-ca/money/topstories/opinion-new-cra-reporting-rules-for-trusts-are-a-disaster/ar-BB1jSx6L?ocid=msedgdhp&pc=U531&cvid=327418e54b044cd2ac38ab379bc1a9d0&ei=186  It is important to avoid tax problems eg failure to pay tax can result in penalties so ask your CPA about whether you have to file a tax return for a trust as part of your 2023 tax return. It is also cheaper to be proactive to reduce claims by disappointed beneficiaries. We can help clarify your possible legal issues by drafting estate documents to confirm the facts and the intentions of the people involved eg draft a trust agreement.