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Joint Bank Accounts = Bare Trusts ?!
March 28, 2024
12:20 pm
AltaRed
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March 28, 2024
12:26 pm
HermanH
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That is very helpful. Thanks.

March 28, 2024
1:12 pm
Bill
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Great, thanks AltaRed. I appreciate the government/CRA's quick response to my post #57 earlier today!

I agree, Saver-Mom, what is useful here is not complicated trust concepts, what's helpful is basic direction on whether or not common bank account situations (e.g. parent or grandparent open account "in trust" for minor child, adult child added as joint to elderly parent's account to help manage parent's finances, parent (or grandparent) and minor child joint bank accounts, joint accounts made so solely for CDIC purposes, etc) could be caught by these rules as several legal or accounting professionals have indicated.

March 28, 2024
1:21 pm
Saver-Mom
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Norman, I meant in awe of your financial knowledge!

Agreed, Bill, just took CRA a while to figure out they were making a mess.

Thanks Alta, looks like Norman was right as was my plan to use strategic avoidance!

March 28, 2024
3:12 pm
canadian.100
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AltaRed said
Just in... CRA has thrown in the towel for 2023 for Bare Trust reporting.

https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2024/bare-trusts-exempt-from-trust-reporting-requirements-2023.html  

I can imagine the anger on the part of those who paid accountants to make the March 31 due date - it is unbelievable.
There was no need to rush things when they haven't been able to define the requirements clearly and caused a lot of frustration and confusion for Canadians, financial advisors, accountants and lawyers etc. On my part, it was impossible to even get through on the CRA phone line - I do not have time to hold for 2 hours.

March 28, 2024
3:16 pm
julio
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Having called CRA with the same result, having read this thread, printed out the T3 and Sch15, if look likes that filling out the forms takes 2 minutes. (Not worth a $500 accounting fee a friend was quoted.)

Thus my question:

Is there any downside to filing, maybe even an upside? CRA, upon death of the joint parent, will want to collect the probate. If I was to report the parent as settlor and beneficiary AND myself as trustee and beneficiary, then there is obviously no trust in existence. But would a T3 not allow for smoother transfer, upon death of parent, to me, the JTWROS, in the eyes of the government?

From BMO: "If your joint account has a right of survivorship, you acknowledge that the money in your account belong to all of the joint account holders jointly and if you die the money will automatically become the property of the surviving account holders. It will not become part of your estate."

March 28, 2024
3:34 pm
Bill
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My main concern with filing is you first have to apply for a T trust account number with CRA (equivalent of SIN for individuals) for every different trust you're involved in and those trusts are in their computer forever, who knows what they'll come hounding you about in the future?

CRA has nothing to do with probate process, they have no interest in it.

March 28, 2024
4:22 pm
julio
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CRA reverses course, exempts bare trusts from new regulations
Jamie Golombek: Bare trusts will be exempt from trust reporting requirements for 2023

March 28, 2024
5:57 pm
HermanH
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Bill said
My main concern with filing is you first have to apply for a T trust account number with CRA (equivalent of SIN for individuals) for every different trust you're involved in and those trusts are in their computer forever, who knows what they'll come hounding you about in the future?

That Trust account number was what had me stumped.

March 28, 2024
8:52 pm
Norman1
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julio said

Is there any downside to filing, maybe even an upside? CRA, upon death of the joint parent, will want to collect the probate. … But would a T3 not allow for smoother transfer, upon death of parent, to me, the JTWROS, in the eyes of the government?

Downside is that one may end up legally declaring a trust when there wasn't a trust before. Pretty hard to walk it back later and say one didn't intend to have a trust when you've signed documents saying there is a trust.

Probate tax is paid to the provincial probate court that probates the will. It's not paid to CRA.

Probate court is not involved initially after death of a joint account holder. Someone brings the death certificate to the financial institution with signed statement from the surviving holders supporting the deletion of the deceased holder from the account. Deceased's name is then removed from the account.

From BMO: "If your joint account has a right of survivorship, you acknowledge that the money in your account belong to all of the joint account holders jointly and if you die the money will automatically become the property of the surviving account holders. It will not become part of your estate."

Not correct. If your joint account has a right of survivorship, you acknowledge that the money in your account is legally owned by all of the joint account holders jointly. If you die the money will legally be owned by the surviving account holders. Legal ownership does not always include beneficial ownership. The money may or may not become part of your estate depending on whether or not the survivors win a possible legal challenge.

March 29, 2024
7:05 am
julio
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Thank you, Bill and Norman1.

March 29, 2024
7:35 am
Laertes
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Just came here to vent. I filed a few days ago. As is seen in some other thread somewhere, my parents sold their house, and I created a bank account with my parents and the bro just for CDIC protection.

I screwed up initially when getting my trust number, which caused a bit of a headache. Then, I filed my taxes on paper on Monday and sent by registered mail. Now, that stress and the (minimal) money spent to comply with the law was all a waste of time.

I hope this doesn't come back to burn me, as described above. I made myself trustee and beneficiary, the parents settlors and beneficiaries, and the bro a beneficiary.

I'm pissed, but you know, bigger things to be angry about, so I'll move on. sf-smile

March 29, 2024
8:44 am
Norman1
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Saver-Mom said
Norman, I meant in awe of your financial knowledge!

Agreed, Bill, just took CRA a while to figure out they were making a mess.

Thanks Alta, looks like Norman was right as was my plan to use strategic avoidance!

You may not have actually needed to avoid anything in your situation. It really depends on the arrangement.

According to accounting firm EY, the new trust filing requirements only apply to trusts that are created with the settlor’s express written or verbal intent. Those are called express trusts. By definition, one cannot accidentally create an express trust!

Resulting trusts are one of the kinds of trusts that end up being formed by operation of law without any settlor’s express written or verbal intent. Resulting trusts are the ones commonly seen in probate court disputes involving joint accounts. Resulting trusts are not included in the new reporting requirements.

I think one needs to look at all the facts around an arrangement involving the bank accounts, both joint and non-joint. Is there even a trust? When there is, is the trust one of the kinds of express trusts?

Lowe Estate v. Lowe (2014 ONSC 2436) that was discussed previously has an example of an arrangement that was ruled to be an inter vivos trust that was expressly set up and bypassed the insolvent estate. The deceased settler did more than just make someone a joint holder of a bank account.

March 29, 2024
3:10 pm
Dean
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AltaRed said

Just in... CRA has thrown in the towel for 2023 for Bare Trust reporting.

https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2024/bare-trusts-exempt-from-trust-reporting-requirements-2023.html  

Just in case anyone missed it

Until next year . . .

    Dean

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

March 29, 2024
3:52 pm
Norman1
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Only the new reporting for trusts that are bare trusts has been paused until next year.

Not all trusts are bare trusts. Someone opening an in-trust account for a child and funding it can end up with a trust and that trust would not be a bare trust. Such a trust is not exempted.

March 29, 2024
5:32 pm
Bill
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According to the E&Y article the new requirements do not just apply to express trusts, they also apply to "agency and other commercial arrangements" and to "other informal trust and agency relationships", the latter of which they cite the following as a possible example of: "An individual holds an “in trust” bank or investment account for a child or a parent".

I am immediately closing any accounts I'm involved in that are named/labelled as "in trust" for someone (these to me clearly are trusts but not bare trusts, according to CRA definition of bare trust), CRA will easily find them, and I'll reset the accounts up the next best alternate way.

March 29, 2024
6:10 pm
Norman1
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New trust reporting requirements do not apply to agency arrangements or other arrangements that are not trusts. According to law firm Osler, CRA has issued two recent technical interpretation that clarify that.

See my previous post.

March 29, 2024
6:32 pm
Norman1
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In-trust accounts are intended to be a low-cost way to form a trust. Unfortunately, the in-trust account type and the opening documentation on their own may fail to adequately establish all three legal certainties required for a trust. The result is that no trust is legally established.

This is from Canadian Bar Association article In-trust Accounts: The good, the bad, and the ugly:

In order to create a legal trust, there must be three identifiable certainties: there must be certainty of the intention to create a trust; certainty as to what property makes up the trust; and certainty as to who the beneficiary or beneficiaries are. A formal trust is typically evidenced by a document called a Deed of Trust or a Deed of Settlement, so there is no question as to whether those certainties exist.

These account-opening forms may lack adequate documentation with respect to who the contributor is, who the trustee is and who the beneficiaries are. They are also commonly set up with one individual acting as both contributor and trustee. Without formal documentation of intention – as well as definition around key issues such as how the funds should be managed, how long the trust will continue and how assets can be distributed to the beneficiary – things can get messy.

When someone opens an in-trust account, in the eyes of the Canada Revenue Agency a trust may or may not have been created – it will depend on whether those three certainties can be established. The account might be construed as having established more of an agency relationship between the contributor and the beneficiary for investment purposes. Depending on what decision the CRA makes, the account holder might want a court to consider the issues. So much for skipping on those lawyer fees.

That's with an account with "in-trust" in its description. With joint accounts, what documents did one sign to establish the three certainties required of a trust?

Maybe the certainty of intent to form a trust wasn't established because there was no such intent when the adult child was added to the joint account. Instead, maybe the joint account should be construed as establishing "more of an agency relationship between" the original account holder and the added account holder for the added holder to assist the original holder with his/her banking!

March 30, 2024
6:13 am
Bill
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Thanks, Norman1, that's helpful.

When a grandparent opens a bank account "in trust" for a grandchild (for example), to me, as a rank amateur, there is certainty of intention, of the property in the trust (cash), and of the beneficiary. But I understand that's completely arguable.

Last thing I'm interested in is a battle about similar arrangements with CRA, especially as the people making CRA's original assessment might barely even know what a trust is (based on my recent phone calls with them that seems likely), including possible court battle, so I'm going to figure out the next best way to be involved in these arrangements. I've zero faith in CRA employees' competence in anything but the most rudimentary operations such as how to fill out forms, how to file returns, etc, that's my impression is the limit of their understanding or even interest in anything tax related - it gets even a tiny bit complicated and they abandon the phone call, in my recent experience.

March 31, 2024
9:55 am
Norman1
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Bill said

When a grandparent opens a bank account "in trust" for a grandchild (for example), to me, as a rank amateur, there is certainty of intention, of the property in the trust (cash), and of the beneficiary. But I understand that's completely arguable.

That depends on the bank account documentation and other documentation signed.

Is there really certainty in beneficiary? What if the grandchild passes away before reaching age of majority? Who is the beneficiary then, according to the documentation?

Grandparent may just be accumulating funds for a potential gift in the future. The grandparent may not have intended to create a trust to hold an irrevocable gift when he/she opened the in-trust account.

Is there enough in the documentation for the grandchild to sue the grandparent or the grandparent's estate for breach of trust should the money not be there when the grandchild asks for it after reaching age of majority?

The answer needs to be yes for there to be a trust.

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