I wish T3 was just the third Terminator movie.
While I never saw Terminator 3: Rise of the Machines, it can’t be scarier than the T3 Trust Income Tax and Information Return that the Canada Revenue Agency wants you to file if you’re the trustee of a bare trust.
The T3 seems designed for complex trusts, which high-net-worth individuals and families use to manage their assets. For bare trusts, the T3 is overkill. I know this because I just filled one out to report the joint bank account I have with my 95-year-old mom.
I pay my mom’s monthly bills – all two of them – as well as making her charitable donations and e-transferring birthday gifts to her grandchildren. It’s a common arrangement in families that suddenly got complicated. As Globe personal finance reporter Erica Alini and I have noted, joint banking and investment accounts can be considered bare trusts.
Is it possible for people with simple bare trusts like mine to fill out their own disclosure forms? Here’s what happened when I gave it a try with some assistance from tax specialist Yannick Lemay of H&R Block.
The process of filling out the T3 began with the downloading of the 2023 T3 Trust Guide, the T3 Trust Income Tax and Information Return, and the T3 Schedule 15, where you disclose beneficial ownership of a trust. The files are in PDF format and can be downloaded as either a printable document or one you can fill out on your computer.
The first thing you’re asked for on the T3 is a trust account number, which I don’t have because, until this year, I never considered joint ownership of my mom’s account as a trust arrangement.
There are a few ways to get a trust account number – fill out and mail a T3APP Application for Trust Account Number or use the CRA’s My Account portal. The form available on My Account to obtain a trust number is easy to fill out, but I tripped over providing the “name” of the trust. What, like Fluffy or Rex? After consulting some online guidance from the CRA, I went with a generic title along the lines of parental bank accounts. Mr. Lemay thought that was fine.
The top of the T3 is basic stuff including address, phone number and such for the trustee of the trust, which means the person making decisions. You must also add the fiscal period for the return – Jan. 1 to Dec. 31 of 2023 in this case.
Next, under “Type of trust,” choose “Code 307, Bare Trust.” In the box headlined “Information about the return,” indicate that this is the first year you’re filing. There’s a reference in this section to a trust document, which often doesn’t exist for informal bare trusts like the one I’m reporting. Mr. Lemay suggested clicking the “sent” box to indicate that no further trust documentation is coming.
The next step is to answer 14 yes or no questions that speak to the complexity of some trusts. Example: Does the trust hold shares in a private corporation? I end up answering no to all 14 questions. Mr. Lemay said that was correct.
Now, onward to calculating the trust’s total income. I left this part of the T3 form blank, a decision that was backed up after a call to a pleasant and efficient CRA trust expert who explained that interest from the bank accounts would be reported to the CRA via T5 slips sent to my mom by the bank where the accounts are held.
Mr. Lemay agreed that there’s really not much more to filling out the T3. Nowhere does the form ask for information about what assets constitute the bare trust you’re reporting.
One final task is to complete the T3 Schedule 15 form that must accompany the T3 annually to report on the trust’s beneficiary, trustee and settlor. The beneficiary is the person for whose benefit the trust was created – my mom, in this case. I’m the trustee, or the administrator of the accounts that make up the bare trust. My mom is also the settlor, the person who contributed assets to the trust.
The big question with Schedule 15 is how to fill out Part B – “Identification of reportable entities.” Mr. Lemay said I needed to fill out Part B three times – to disclosure the name, address, birthdate and social insurance number for the beneficiary, trustee and settlor. I did this by printing three copies of Schedule 15 and using only Part B on two of them.
Filling out a T3 and Schedule 15 seemed mystifying to me at points, but doable. Mr. Lemay’s take is that people who have some familiarity with tax-filing should be able to handle this task. “The instructions are pretty straightforward if you’re in a simple situation.”
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Rob Carrick