Joint Bank Accounts = Bare Trusts ?! | Page 3 | Income tax filing | Discussion forum

Please consider registering
guest

sp_LogInOut Log In sp_Registration Register

Register | Lost password?
Advanced Search

— Forum Scope —




— Match —





— Forum Options —





Minimum search word length is 3 characters - maximum search word length is 84 characters

No permission to create posts
sp_Feed Topic RSS sp_TopicIcon
Joint Bank Accounts = Bare Trusts ?!
March 14, 2024
11:10 am
canadian.100
Member
Members
Forum Posts: 939
Member Since:
September 7, 2018
sp_UserOfflineSmall Offline

GR said
Lots of interesting opinions on this thread.

Situation: Two siblings have a joint bank account as JTWROS. The primary sibling funded the account 100% and pays 100% of the income tax on interest and the joint account was set up for expanded CDIC coverage and for the money to pass, upon death of one owner, directly to the survivor without being part of the estate.

Is this a "bare trust"? I am preferably interested in a professional interpretation, especially from any lawyers reading this, or from anyone who has received guidance from CRA or a lawyer, for a similar situation. Also, although I don't consider this to be a bare trust, if CRA does, who files the T3 - primary owner or secondary owner? Thanks.  

I contacted my lawyer as I was interested in your example of the siblings who have a joint account, where one sibling did the full funding of the joint account and declares and pays the income tax on the interest. My lawyer says a factor in determining whether this is a bare trust or not is who is receiving the interest for the years of the existence of the joint account while the siblings were alive. The principle is who is actually benefitting from the set up of the joint account. If the sibling who did not contribute any funds to the joint account, but yet has access to interest/receives the interest while both siblings are alive, this may be a factor in determination.
I suggest people here contact their own lawyers to receive professional advice if they have concerns about their individual situations and possible bare trusts and filing requirement.

March 14, 2024
12:48 pm
bhuc
Toronto
Member
Members
Forum Posts: 138
Member Since:
October 5, 2017
sp_UserOfflineSmall Offline

GR said
Situation: Two siblings have a joint bank account as JTWROS. The primary sibling funded the account 100% and pays 100% of the income tax on interest and the joint account was set up for expanded CDIC coverage and for the money to pass, upon death of one owner, directly to the survivor without being part of the estate.

A financial specialist at CIBC confirmed to me that a joint GIC is not a bare trust.
This is based on the fact that there a 2 equal joint owners and one has JTWROS (joint with right of survivorship) with both legal and beneficial ownership.

March 14, 2024
3:36 pm
Bill
Member
Members
Forum Posts: 3903
Member Since:
September 11, 2013
sp_UserOfflineSmall Offline

Thanks, bhuc, that's good to know, coming from a pro.

If you get a chance ask her if that's the same for a joint bank account where a child has been added to a parent's account in order to help manage parent's money. The TD video lady said that situation wasn't clear in her view, be nice to hear another opinion.

March 14, 2024
5:21 pm
Loonie
Member
Members
Forum Posts: 9232
Member Since:
October 21, 2013
sp_UserOfflineSmall Offline

I don't know about the rest of you, but I would consider the opinion of an alleged "financial specialist" (qualifications unknown) at a bank to be worth next to nothing.

I do appreciate the effort to get an answer, but we need more than hearsay to be confident.

March 14, 2024
5:42 pm
Saver-Mom
Member
Members
Forum Posts: 311
Member Since:
December 12, 2015
sp_UserOfflineSmall Offline

I think this is misleading

https://nationalpost.com/news/canada/canadian-tax-season-bare-trust-filing

Lots of interesting comments and high anxiety and anger, but I think CRA is looking for crooks who are paying their child’s mortgage, not honest savers like us who are just extending CDIC coverage.

March 14, 2024
7:18 pm
Norman1
Member
Members
Forum Posts: 6732
Member Since:
April 6, 2013
sp_UserOnlineSmall Online

Saver-Mom said
I think this is misleading

https://nationalpost.com/news/canada/canadian-tax-season-bare-trust-filing

Lots of interesting comments and high anxiety and anger, but I think CRA is looking for crooks who are paying their child’s mortgage, not honest savers like us who are just extending CDIC coverage.

It is misleading. One can't have a bare trust without having a trust. Just like one can't be a golden retriever dog without being a dog.

CRA is looking for people who are using their child as a front for themselves or others. Perfectly legal to gift a child money for him/her to pay a mortgage. Perfectly legal to gift a child money for him/her to pay living expenses and university expenses. No trust is created when parents do so. No need to file anything in Canada as there's no gift taxes like there is in the US.

Just because the lucky child is trusted to spend the money on living expense or a mortgage doesn't make the child a trustee of a trust.

March 15, 2024
6:43 am
bhuc
Toronto
Member
Members
Forum Posts: 138
Member Since:
October 5, 2017
sp_UserOfflineSmall Offline

A financial specialist at CIBC confirmed to me that a joint GIC is not a bare trust.
This is based on the fact that there a 2 equal joint owners and one has JTWROS (joint with right of survivorship) with both legal and beneficial ownership.

This is CIBC's position as communicated to me by the specialist and it is in writing.
Now what CRA thinks the joint GIC is with regards to being a bare trust , is the only thing that matters. Only time will tell.
But my butt is covered if CRA comes a knocking.

March 15, 2024
8:46 am
Bill
Member
Members
Forum Posts: 3903
Member Since:
September 11, 2013
sp_UserOfflineSmall Offline

bhuc, CRA still holds us responsible for adhering to the tax laws, irrelevant to them whether we got good or bad advice or not from a 3rd party. CRA will usually be lenient if incorrect advice came from CRA.

March 15, 2024
4:28 pm
Loonie
Member
Members
Forum Posts: 9232
Member Since:
October 21, 2013
sp_UserOfflineSmall Offline

Some of you may find this of interest.

https://www.canadianlawyermag.com/practice-areas/trusts-and-estates/what-lawyers-need-to-know-about-bare-trusts-and-this-years-new-trust-reporting-rules/384193

I have no professional expertise, but, to me, this all sounds much more complicated and expensive than a simple joint account with a relative would merit.

March 26, 2024
4:27 pm
Bill
Member
Members
Forum Posts: 3903
Member Since:
September 11, 2013
sp_UserOfflineSmall Offline

Some info about joint accounts, bare trusts, etc from today's Globe, Rob Carrick:
https://globe2go.pressreader.com/article/282020447294868

March 27, 2024
12:54 pm
Saver-Mom
Member
Members
Forum Posts: 311
Member Since:
December 12, 2015
sp_UserOfflineSmall Offline
March 27, 2024
1:29 pm
Wrayzor
GTA
Member
Members
Forum Posts: 73
Member Since:
March 14, 2023
sp_UserOnlineSmall Online

Saver-Mom said
Confirming what we thought, a dumb idea that will not be applied

https://financialpost.com/opinion/opinion-canadians-will-ignore-the-new-trust-reporting-rules-so-will-the-canada-revenue-agency  

I won't be relying on an opinion piece for tax advice. Linked articles in previous comments are more useful, but even they are no substitute for real professional advice.

March 27, 2024
3:37 pm
Bill
Member
Members
Forum Posts: 3903
Member Since:
September 11, 2013
sp_UserOfflineSmall Offline

I agree, Wrayzor, trouble is even the professionals don't agree on how this is all going to shake out in the end.

I cited the Carrick article mainly because it specifically dealt with some of the joint bank account situations asked about on this thread and Carrick's pro said they were bare trusts.

March 27, 2024
6:46 pm
Norman1
Member
Members
Forum Posts: 6732
Member Since:
April 6, 2013
sp_UserOnlineSmall Online

I think the problem is that people are saying there is a trust where there legally isn't one. When there isn't a trust, there cannot be a bare trust.

EY Tax Alert 2024 No. 04 (6-Feb-2024): New trust reporting requirements are broader than you think says the new reporting requirements only apply to express trusts:

T3 return filing and additional information reporting are now required on an annual basis for express trusts (i.e., trusts that are created with the settlor’s express written or verbal intent, as opposed to other trusts arising by operation of law [like resulting trusts and constructive trusts]) that are resident in Canada or deemed resident in Canada, subject to certain exceptions (see below), effective for taxation years ending on or after 31 December 2023.4

The court cases I've seen involving joint accounts are plaintiffs trying to establish that there is a resulting trust with the surviving account holder holding the account in trust for the estate.

I haven't run into any case where a probate court rules that an inter vivos express trust, for the benefit of the deceased, was established when the survivor was added as a joint holder of the deceased's bank account and the survivor/trustee is now in breach of his/her trustee duties by not handing the funds over to the deceased's estate.

I don't see any need for courts to use the resulting trust device to compel the return of funds to the deceased's estate if there really was an express trust already established.

March 27, 2024
6:57 pm
Norman1
Member
Members
Forum Posts: 6732
Member Since:
April 6, 2013
sp_UserOnlineSmall Online

Saver-Mom said
Confirming what we thought, a dumb idea that will not be applied

https://financialpost.com/opinion/opinion-canadians-will-ignore-the-new-trust-reporting-rules-so-will-the-canada-revenue-agency

I don't think CRA is refusing to enforce the new trust reporting rules. I think CRA doesn't believe there is a legal trust for the new rules to apply to in the situations people are saying there is.

I don't believe the example about the parent owning the phone in trust for his daughter just because parent signed the contract. I would say the parent actually gifted the phone to the daughter and assumed the cost of the phone and the servicing of the phone.

Ownership of the phone was transferred when the parent handed the phone to the daughter, just as the ownership of a bearer bond would be transferred.

When someone sells a second-hand phone, does the buyer need to obtain a signed deed of transfer from the current owner and then submit the deed to a mobile phone title office to be registered?

March 28, 2024
4:24 am
Saver-Mom
Member
Members
Forum Posts: 311
Member Since:
December 12, 2015
sp_UserOfflineSmall Offline

Wrayzor said

I won't be relying on an opinion piece for tax advice. Linked articles in previous comments are more useful, but even they are no substitute for real professional advice.  

Well I got the same opinion from a CRA employee/friend so I’ll go with that.

March 28, 2024
5:36 am
Bill
Member
Members
Forum Posts: 3903
Member Since:
September 11, 2013
sp_UserOfflineSmall Offline

Saver-Mom, just to be clear, are you saying your CRA employee friend said people with joint bank accounts should get professional advice?

I'm guessing the average CRA employee, or their superior, has no more idea of what is or isn't a trust than the rest of us, I've called a few times to enquire, had to wait extra long to get through to their people devoted to the new trust rules, and as soon as it became clear my question was very direct (i.e. it was only about whether joint family bank accounts are caught in this), after telling me they would have to examine all the documents I sent them and decide on a case-by-case basis and me asking them what documents would they want for a joint bank account, the line was disconnected, 3 different employees ghosted me because they had no idea. They just wanted to tell me what the new rules were, how to fill out Schedule 15, etc. Three times, so I give up!

It's interesting to me that neither the government nor CRA has given guidance on how, if at all, this affects joint bank accounts with various family members (spouse, child, grandchild, etc), a very common arrangement for many Canadians. Esoteric arguments and opinions about trust law, whether by professionals or amateurs in online forums, are really no help to the average person with a joint bank account, people need the specifics regarding the legislation's intent and CRA's enforcement or not re joint family bank account situation.

March 28, 2024
9:43 am
Norman1
Member
Members
Forum Posts: 6732
Member Since:
April 6, 2013
sp_UserOnlineSmall Online

The joint account is just a detail. Whether or not there is a trust does not rest on there being joint owners to a bank account. One can have a trust without there being a joint account. One can have no trust in spite of there being a joint account as in the Pecore case.

It is the arrangement between the people that determines whether or not there is a trust.

I also think people are seriously misreading what CRA has said especially about bare trusts:

3.1. What is a bare trust?
The term "bare trust" is not defined in the Income Tax Act. However, a bare trust for income tax purposes is a trust arrangement under which the trustee can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust's property. …

CRA doesn't say that any arrangement where someone is acting as an agent for someone else is a bare trust. Only trust arrangements in whch someone is acting as an agent are bare trusts.

There are many kinds of arrangements where someone is acting as an agent that aren't trusts and won't be required to file a trust return because the arrangement isn't even a trust. For example, a partnership with a general partner and limited partners. The arrangement is a partnership, not a trust, and not required to file a T3 return now. The general partner is a partner, not a trustee.

This is from law firm Osler in Guide to new Canadian trust reporting rules (Mar 7, 2024):

In two recent technical interpretations, the CRA clarified that the new reporting rules apply only where a trust exists under the applicable underlying private law (namely civil law in Québec and common law elsewhere). This clarification is welcome as some commentators had been concerned that the reference to “an arrangement” in the new rules (which mirrors the language of the bare trust exclusion) could potentially have been intended to expand the scope of the new rules to entities that are not otherwise trusts under private law (or entities that are not otherwise deemed to be trusts for purposes of the ITA).

As a result, taxpayers should be aware of the new filing obligations and additional disclosure requirements set out below in the following circumstances:

  1. Ordinary trusts, entities deemed to be trusts for purposes of the ITA and trusts falling within the bare trust exclusion are subject to the trust reporting rules unless they qualify for an exemption.
  2. Nominee or agency arrangements that may have some trust-like features, or that use some trust-like language in the relevant documentation, but that are not trusts under the applicable private law are not subject to the trust reporting rules. However, the existence of trust-like features or trust-like language in the relevant documentation could create uncertainty as to whether there is a trust under the applicable private law, and could therefore increase the risk of the CRA on audit taking the position that a trust exists under the applicable private law. As a result, in these circumstances it may be prudent to report under the trust reporting rules to mitigate the risk of the CRA assessing penalties on audit.
  3. Nominee or agency arrangements that are not trusts under private law are not subject to the trust reporting rules. Accordingly, the new rules do not create any reporting obligations for such arrangements.

We note that some commentators have suggested that trust reporting may be required in both scenarios 2 and 3 above. However, the recent CRA technical interpretations (which are consistent with the text of the relevant provisions) confirm that reporting should not be required where a trust does not exist under private law and no provision of the ITA deems a trust to exist.

#2 is why CRA needs to look at all the facts, not just the joint bank account agreement from the bank, to determine whether or not the arrangement is a trust.

March 28, 2024
11:48 am
HermanH
Member
Members
Forum Posts: 1152
Member Since:
April 14, 2021
sp_UserOfflineSmall Offline

Bill said
I'm guessing the average CRA employee, or their superior, has no more idea of what is or isn't a trust than the rest of us, I've called a few times to enquire, had to wait extra long to get through to their people devoted to the new trust rules, and as soon as it became clear my question was very direct (i.e. it was only about whether joint family bank accounts are caught in this), after telling me they would have to examine all the documents I sent them and decide on a case-by-case basis and me asking them what documents would they want for a joint bank account, the line was disconnected, 3 different employees ghosted me because they had no idea. They just wanted to tell me what the new rules were, how to fill out Schedule 15, etc. Three times, so I give up!

I'm in the same boat. I have several joint accounts with an aged parent that are empty and am not able to fill out all the blanks on the Sch15. I should be under the $50K exemption, but we did move some larger sums through some of the accounts during the year to purchase GICs. I am thinking about just claiming all of them bare trusts, even when they probably aren't and filling whatever I can on the Sched15. That way, if something is on file, even if it was unnecessary, in order to avoid any potential penalties. My concern is that the stupid f**** at CRA won't tell me that I did not need to file anything and, instead, keep hounding me for unnecessary details.

March 28, 2024
12:19 pm
Saver-Mom
Member
Members
Forum Posts: 311
Member Since:
December 12, 2015
sp_UserOfflineSmall Offline

Bill, no, my friend said there was a lot of money laundering/ hiding to avoid taxes so they came up with this new rule to catch criminals, not to target simple joint accounts.

Norman, I can not really understand your level of financial knowledge.

Contrary to Herman I will NOT fill out any forms because my feeling is a JOINT ACCOUNT is not a TRUST.

No permission to create posts

Please write your comments in the forum.