Bare Trust T3 Rules, RESPs, and Penalties

This page explains, in plain language:

• Whether a RESP is a bare trust
• When you do not have to file a T3 for a bare trust
• When you likely do have to file
• Why the penalties are so dangerous for ordinary Canadians

Is a RESP a Bare Trust?

Short answer: No. A Registered Education Savings Plan (RESP) is generally not a bare trust.

An RESP is a registered plan under the Income Tax Act. It has its own legislated structure, rules, and reporting handled by the RESP promoter (the financial institution). In a typical RESP:

• The subscriber (often a parent or grandparent) controls contributions and investment choices.
• The beneficiary (the child) does not own the funds and has no automatic right to demand them.
• The financial institution administers the plan under specific statutory rules.

A bare trust, by contrast, is an arrangement where one person holds legal title only for the benefit of someone else, with no discretion and full control resting with the beneficiary. That is not how RESPs work.

Result: RESPs are treated as registered plans and are not subject to the new bare trust T3/Schedule 15 reporting rules.

Registered plans that are generally exempt

The following registered plans are not bare trusts for these rules and do not require T3 bare trust filing:

• RRSP
• RRIF
• TFSA
• RESP
• RDSP
• FHSA

When You Do Not Have to File a T3 for a Bare Trust

Under the new rules, many Canadians want to know where they are safe. Here are the main situations where a T3 bare trust filing is generally not required:

1. The arrangement fits an explicit exemption

✔ True joint ownership (not a bare trust)

You typically do not have to file if both people on title:

• Actually use and benefit from the account or property, and
• Both have real ownership, not just “name on paper.”

Examples:

• Joint bank account between spouses where both deposit and spend.
• Joint account between parent and adult child where both genuinely use it.
• Joint ownership of a home where both parties live there or share the benefit.

✔ Parent on title only to help with a mortgage (principal residence)

If a parent is on title of a child’s home only to help qualify for a mortgage, and the child lives in it as their principal residence, that situation is generally exempt from bare trust T3 filing.

Important: This usually does not apply to rental or investment properties.

✔ Small, simple asset arrangements under $50,000

There is an exemption where the trust holds only “simple” financial assets (such as cash, GICs, mutual funds, publicly traded securities) and the total value is under $50,000 throughout the year.

If the trust holds any of the following, the exemption is lost:

• Real estate
• Private company shares
• Cryptoassets
• Precious metals
• Other non‑financial or complex assets

2. The arrangement is not a bare trust at all

A bare trust generally exists only when:

• One person holds legal title strictly for someone else’s benefit, and
• The title‑holder has no real discretion, and
• The beneficiary effectively controls what happens.

If the person on title uses the property, benefits from it, or has real decision‑making power, it may not be a bare trust. In that case, the bare trust T3 rules may not apply.

3. Years that CRA has exempted

CRA has already cancelled or deferred bare trust reporting for some earlier years. The new regime is aimed at taxation years ending on or after a future implementation date (for example, years ending on or after December 31, 2026, with first filings due March 31, 2027, under Bill C‑15 as currently framed). Always confirm the current year’s rules with a professional or directly from CRA.

When You Likely Do Have to File a T3

If none of the exemptions apply and the arrangement looks like “one person holding legal title for the use or benefit of another,” a T3 bare trust filing may be required. Common examples:

• Parent added to an adult child’s bank account “for convenience only,” where the money is really the child’s.
• Adult child managing an elderly parent’s bank or investment account in the parent’s name.
• Parent on title of a child’s rental or investment property where the economic benefit belongs to the child.
• In‑trust‑for (ITF) investment accounts for children that exceed the small‑asset exemption.
• Nominee corporations or individuals holding real estate for someone else’s benefit.

These are exactly the kinds of ordinary family situations that can trigger harsh penalties even when no tax is owing.

Penalty Risk: Why This Matters So Much

The penalty structure is what makes these rules so dangerous for ordinary Canadians:

• Base late‑filing penalty: typically $100–$2,500.
• Gross negligence penalty: the greater of $2,500 or 5% of the highest fair market value of all property held in the trust during the year, with no dollar cap.

Examples of potential gross negligence penalties (per year):

• $200,000 property → up to $10,000 penalty
• $500,000 property → up to $25,000 penalty
• $1,000,000 property → up to $50,000 penalty
• $2,000,000 property → up to $100,000 penalty
• $5,000,000 property → up to $250,000 penalty

All of this can apply even when the family owes $0 of income tax—the penalties are for missing a filing, not for evading tax.

Take Action, But Don’t Panic

The goal of pages like this and the resources at trust.tedlee.ca is to help Canadians:

• Recognize when a family arrangement might be a bare trust.
• Understand when a T3 filing may be required.
• Ask better, more precise questions of their tax and legal advisors.
• Engage their Member of Parliament using resources like the MP letter template.

If you have any arrangement where one person is “on title” or “on the account” for someone else’s benefit, you should assume it is worth a serious, professional review.