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Joint Bank Accounts = Bare Trusts ?!
February 28, 2024
10:12 am
Dean
Valhalla Mountains, British Columbia
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.
Potentially ... If you share a bank account with a parent or relative, you May have to file a 'T3 Return' this tax season !

This is yet to be confirmed elsewhere, but this is what I have so far . . .

.
Is anyone else here aware of this ?

    Dean

sf-cool " Live Long, Healthy ... And Prosper! " sf-cool

February 28, 2024
10:36 am
Case1030
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Dean said

Is anyone else here aware of this ?

    Dean

  

Seems a few might be...

https://www.highinterestsavings.ca/forum/income-tax-filing/new-tax-filing-obligations-for-trusts-in-2024/

February 28, 2024
11:50 am
Dean
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.
Thanks for that link, Case.

It appears that the only one who isn't aware of this, is Me !

LOL

    Dean

sf-cool " Live Long, Healthy ... And Prosper! " sf-cool

February 28, 2024
1:16 pm
HermanH
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I went into a couple of branches to get clarification, RBC and CIBC. No one had a clue about the changes. All told me that our accounts were joint, but not trust accounts and we should be just fine. Of course, they are just front-end and branch manager staff.

February 28, 2024
4:41 pm
AltaRed
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My experience is typical bank staff will suggest all sorts of things for convenience and minimization of paperwork without being aware of consequences.

They probably would stare with 'deer in headlight' syndrome if one was to bring up legal vs beneficial ownership issues, especially in the context of non-marital joint ownership situations. The courts gotta love this stuff (roll eyes) when joint ownership of convenience becomes a bun fight in Estate distributions.

February 28, 2024
5:55 pm
Bill
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The TD video indicates this will apply where a parent adds a child's name to the parent's account for parent's money management purposes but it also says there's an administrative grace period for 2023 tax year for the average person who knows nothing about this stuff (she says even the experts are not in agreement on all this so CRA may very well apply that administrative grace for last year for most of these situations). But who knows for sure.

Note that filing deadline for trust returns is 90 days after year-end which would be March 30 for December 31 year-ends, and you'd first have to get a CRA trust account number from CRA in order to file.

TD video lady also said deal with your advisor, tax lawyer, etc, on this, which is useless info as likely very few people who are added to their parent's account would be dealing with such professionals.

One of my adult kids has opened accounts with me as secondary joint, done same with his mother, all his own money, in order to have more CDIC coverage, appears these rules apply in our case but we're going to ignore it for this year anyway and hopefully it'll be clarified by next year.

February 28, 2024
6:32 pm
AltaRed
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Since none of us really knows how this is going to unfold this year and next, what we really need to happen this year, is for the banking industry to make it a whole lot easier to set up formal POA over accounts. This Joint (JTWROS) stuff has been a band-aid approach for far too long. Me thinks that is wishful thinking.

February 28, 2024
6:50 pm
HermanH
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I was thinking along similar lines. The only joint things we have are savings accounts and the house is jointly held. However, I heard about huge possible penalties and that gives me pause. While the video lady was right on all points about the ongoing confusion about taxation and how CRA might forgive "honest errors", that means you are relying on some apparatchik's judgment for potentially $1000s of penalties.

Remember, YOU are responsible for all errors made, even those by CRA.

I am thinking of doing the opposite and simply disclosing every joint account on the T3 and stating that we are joint owners of the accounts. One of us is still going to be paying the taxes on the interest. Anyone see a downside to this?

February 28, 2024
7:10 pm
AltaRed
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I would not worry at all about joint accounts between spouses. That is normal marital assets. The unknown is parent/child combinations in certain situations, or accounts held in trust.

Spouse and I have none of these Joint issues, nor do we have anything joint with an adult child or third party, nor would we ever do so, so none of this affects us.

As to your question, I doubt I would proactively do anything this year that pertains to financial accounts since it is all terribly murky.

February 28, 2024
8:05 pm
Bill
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The video lady made clear that these new provisions do not apply to joint accounts held by spouses sharing their money.

However it does affect the situation where the money belongs to one person but another person is added to the account solely to help manage the account, in effect to act as a trustee for the beneficial owner.

February 28, 2024
8:11 pm
HermanH
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Sadly, that is my situation. I am in joint with my mother, both to help her with her management, as well as expand my CDIC coverage.

February 28, 2024
8:26 pm
AltaRed
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HermanH said
Sadly, that is my situation. I am in joint with my mother, both to help her with her management, as well as expand my CDIC coverage.  

You may wish to re-visit at least some of those joint situations. I truly cannot imagine having a joint account with a sibling or parent or adult child just to expand CDIC coverage.

There are not many BBB and lower rated institutions out there that would warrant some concern to keeping within CDIC limits. Home Trust/Oaken Financial and LBC are the only two 'popular' ones I would really have some concern about. Possibly EQ Bank and maybe the banking divisions of CUs. Anything rated A- and better should be of zero concern. That is beyond my pay grade though since I am currently not using any of the online banks for any material sums.

February 28, 2024
9:20 pm
Loonie
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Increased CDIC coverage for the beneficial owner makes sense to me, especially if joint owner is intended to inherit the money anyway. Lots of people on this forum deal with Oaken, EQ, etc, and others may just want to sleep better.

I can't for the life of me understand why this new rule was put into effect without timely reliable information. It's ludicrous.
I think most of us would want to comply, but with what??

It doesn't affect me personally at this time.
.

February 29, 2024
5:04 am
Bill
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My own view is this change was made because this government believes the way forward will be paid for by "taxing the rich", which coincidentally is a growing politically popular sentiment these days. So to that end they want to know anyone who is connected to pools of money, i.e. when we go to grab wealth we know to know exactly who are "the rich". That's my opinion of why this out-of-the-blue-for-no-apparent-reason change was made.

February 29, 2024
6:15 am
Norman1
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The change was introduced years ago in the federal Budget 2018.

There was no intention to collect more taxes. The intention was to collect better beneficial ownership info to determine who really are behind accounts at financial institutions and behind legal entities:

Increased Reporting Requirements for Trusts—Beneficial Ownership

Better information on who owns which legal entities and arrangements in Canada—known as “beneficial ownership information”—will help authorities to effectively counter aggressive tax avoidance, tax evasion, money laundering and other criminal activities perpetrated through the misuse of corporate vehicles.

To improve the availability of beneficial ownership information, the Government proposes to introduce enhanced income tax reporting requirements for certain trusts to provide additional information on an annual basis, applicable for the 2021 and later taxation years.

In December 2017, federal, provincial and territorial Finance Ministers agreed in principle to pursue legislative amendments to their corporate statutes to require corporations to hold accurate and up-to-date information on beneficial owners, and to eliminate the use of bearer shares.

It is doubtful that joint accounts are really trusts. In addition, there's zero additional beneficial information gathered by requiring T3 filings from people who ordinarily use joint accounts. All the beneficiaries are ordinarily listed as the joint owners!

Government is not interested when Alice and her son Bob have a joint account together so that Bob can pay his mother's bills and expenses whenever she gets sick and is not able to. Alice is a beneficiary and recorded as one of the owners of the account. Not that important that Bob is also shown as an owner and could be mistaken for a beneficiary as well.

The government is interested in gathering more info when Alice and Bob have a joint account and they are actually a front for someone, like the husband/father Carl, who is not shown as one of the joint owners on the account and who has a disreputable past.

February 29, 2024
8:16 am
Bill
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Introduced in 2017 or 2018, we had the same party in power as now, same gov't as far as I'm concerned, it's a priority of theirs.

There is additional info if T3 returns are filed for joint bank accounts, isn't there? Currently CRA usually gets only T-slip showing the primary account holder SIN, CRA doesn't know who the secondaries are.

Governments always issue stated reasons for doing what they're doing, I'm not as convinced those stated reasons are always the whole picture. The video lady, who claimed she'd been speaking to various people in this field about this for months, seemed to think gov't might be interested in the situation where Alice adds Bob to help her manage her finances. Then again, some professionals like to whip up fear so people will come and pay for their services.

February 29, 2024
7:31 pm
Loonie
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I don't see that it's simply an initiative of the current govt (or its 2017 version), as Norman's excerpt says the provinces signed on, and they would not normally all be of the same opinion.

In the end, they all want more money, or will: and it doesn't matter which party is in power. For now, they are just tightening up their records. The main target seems to be corporations, where there is potentially more money to be gotten.
However, they will also be interested in people who have joint accounts largely to reduce the income they declare and put it on the tax return of someone in lower tax bracket - should that info come to their attention.

As far as I know (and someone can show me if I'm wrong), this will not tell them how much money you have. It's only about income and who owns which percentage of the account / income. They don't know if the $1,000 on your T5 represents 1% of $100,000 or 6% of $16,667. So I don't really think it's about the wealth tax per se.

March 1, 2024
5:22 am
bhuc
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Thoughts from an accountant. regarding a Bare Trust.

The new Bare Trust rules require that a trustee who manages tasks associated with assets of another person, but has no benefit from the trust, is a Bare Trustee and he must file a T3 information return. If another persons name is included in title to an investment account like a GIC it will depend on the circumstances. If the investment is below $50,000 there is an exemption. If your sibling is added to your name on the GIC and the GIC is worth more than $50,000, your sibling could be a Bare Trustee. He would be a Bare Trustee if his name was added to administer tasks such as renewing the GIC on your behalf, or had arranged the purchase in the first place, that would make him a Bare Trustee.

If on the other hand if he performs no tasks, receives no income from the GIC and is only included to receive the GIC income if you die, then I would not think that is acting like a trustee, and therefore he would not be a Bare Trustee since he not doing any tasks to make him one. That's my thought but I am not a lawyer.

If your sibling acts like a trustee there are heavy penalties for not filing a T3 information return like the greater of $2,500 or 5 % of the asset value. It would be your sibling to file the T3, but if the GIC is less than $50,000 or your sibling takes no part in managing the GIC and receives nothing from it he would not be a Bare Trustee and would not have to file.

March 1, 2024
5:58 am
Bill
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bhuc, I tend to see it like you, mostly.

CRA, albeit in an HST-related document here, has its working definition of a bare trust as:
"means a trust where the trustee has legal ownership of the property but has no other duties, obligations and responsibilities with respect to the property as trustee other than to transfer, under the absolute control and instructions of the beneficiary, the title to the property."

So wouldn't a person whose parent adds them to a joint account to manage parent's funds, i.e. whose only function is to spend the money in it as the parent has set out, i.e. transfer title to the property, be a bare trustee?

And if more duties are included then if not a bare trustee the person might be considered a full trustee.

Either way there's a requirement to file T3 Return now.

On the other hand where someone is added to the account only for CDIC purposes, for example, or to avoid probate taxes or other inheritance purposes, but has zero duties, that suggests it's not a bare trust in CRA eyes.

Again, I think if someone goes to their bank and asks the bank if, for its own internal purposes, it classifies the account as a trust account that might be useful if CRA comes calling, maybe.

When CRA receives a T5 slip they have a pretty good idea of how much money it takes to generate that much interest income, based on general interest rates, though I agree they might be off a bit more in times like this where interest rates are percentage-wise very different than a few years ago. And if you're reporting less income than the T5 slip shows for your SIN they're pretty good at reassessing you and/or finding out under what other SINs the rest of the interest income was reported. In my experience anyway. And with these new trust requirements I'd imagine they're going to be even more focused, if certain joint accounts now are in their sights.

March 1, 2024
8:02 am
AltaRed
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bhuc said
Thoughts from an accountant. regarding a Bare Trust.
 

It is likely going to take opinions from a few accounting firms to obtain more clarity on just what is a bare trust (by way of several 'what if' examples) and what is not. I would have thought the big accounting firms would have that nailed down already going into tax season with their clients across Canada and have published additional guidance as a public service.

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