T3 Trust Filing in 2024

There have been recent changes in the mechanics of how trusts function, including the Graduated Rate Estate (GRE) rules along with new rules in regard to which trusts are required to file a return every year regardless of whether or not there is income to be reported for trusts with taxation years ending after December 30, 2023. The deadline for filing those return is no later than 90 days after the trust's tax year-end. This is generally December 31. Therefore, trusts with a December 31, 2024, must file a T3 by March 31, 2025.

Register by Feb. 15 to save $100 off regular tuition on any DMA Certificate Course Enrolment. Tuition deductions will be applied automatically.

The Backdrop on T3 Trust Filing & Bare Trusts.  Last year, after a false start, and amidst much confusion and consternation, there was a last-minute pardon for filing the 2023 T3 returns for bare trusts.  That pardon was extended in the fall, unless CRA makes a direct request for the filing under certain circumstances in 2025. The new rules introduce the following exemptions:

• Trusts with Assets Values under $50,000. Exempted from the filing rules are trusts that hold specific assets where the Fair Market Value (FMV) is under $50,000 throughout the tax year. 
• Trusts with Related Parties.  Also exempted are trusts in which each trustee is an individual and each beneficiary is an individual who is also related to each trustee.  In this case the $50,000 exemption may be exceeded but can’t be more than $250,000.   Ask your tax advisor about the types of property that can be held in these trusts. These trusts may also have the right to receive dividends or mutual fund or other distributions.
• Trusts held by a lawyer are also exempted as long as they don’t exceed $250,000 and consist only of cash.  These trusts must be required under professional conduct rules or the laws of Canada that stipulate the holding of funds for activities regulated under those rules as long as the trust is not maintained as a separate trust for a particular client. 
• Trusts that hold money to comply with federal/provincial laws. Trusts that are holding money in trust as required for a specific purpose to comply with federal/provincial law will be exempt. 
• Express Trusts.  An express trust includes any arrangement under which one or more persons, referred to as “legal owners” have ownership of a property that is held for the use of or benefit of one or more persons or partnerships.  The legal owner in these instances is reasonably considered to act as an agent for the beneficial owners. There is a lengthy list of filing exceptions which includes the estate planning opportunities with elderly parents and the home ownership objectives noted above. 

Bottom Line.  Discuss trust filing requirements as part of your year end tax planning routine.  There are still advantages to establishing trusts, but the tax rules continue to shift and draft legislation has still not been passed.  

Additional Educational Resources:  Check out the following Professional Certificate Course from Knowledge Bureau:    Filing T3 Trust Returns.  While this course provides professional training,  this knowledge will help families have better conversations with their accountants, lawyers and financial advisors and thereby make more tax-astute financial decisions. 

Specifically, students will learn how to file simple T3 Returns, optimize taxes payable on income earned by a trust and to better understand tax planning and filing requirements to avoid expensive penalties from the CRA.

Course Curriculum:

Chapter 1 – Introduction to Trusts

Chapter 2 – The T3 Return

Chapter 3 – Identification

Chapter 4 – Income of Trust

Chapter 5 – Deductions

Chapter 6 – Dealing with Losses

Chapter 7 – Allocation of Trust Income

Chapter 8 – Calculation of Tax and Credits

Chapter 9 – Filing the Return

Chapter 10 – Special Trusts