Joint Bank Accounts = Bare Trusts ?! | Page 2 | Income tax filing | Discussion forum

Bill said
Introduced in 2017 or 2018, we had the same party in power as now, same gov't as far as I'm concerned, it's a priority of theirs.

There is additional info if T3 returns are filed for joint bank accounts, isn't there? Currently CRA usually gets only T-slip showing the primary account holder SIN, CRA doesn't know who the secondaries are.

Yes. But, CRA is not limited to what is in the annual T5 slips of bank accounts. CRA can request full info about the secondary joint owners just like CRA can obtain the full internal transactions of a TFSA which isn't included in the annual TFSA returns.

If CRA would like that full joint owner info to be provided annually, new optional boxes can be added to the T5 slips for the taxpayer ID and taxpayer type of the non-primary joint owners.

Governments always issue stated reasons for doing what they're doing, I'm not as convinced those stated reasons are always the whole picture. The video lady, who claimed she'd been speaking to various people in this field about this for months, seemed to think gov't might be interested in the situation where Alice adds Bob to help her manage her finances. Then again, some professionals like to whip up fear so people will come and pay for their services.

The TD Wealth director seems to think certain joint accounts situations can be a trust. As a trust, a T3 trust return would now have to be filed in spite of the previous exemptions from trust return filing. But, there isn't consensus among those she has spoken with. So, just to be safe, file a T3 trust return with the new Schedule 15 with beneficiary info.

I don't think she believes that the government is interested when Alice adds Bob to her bank account to help manage finances. She just believes the situation could be caught up in the new requirements.

I don't think the government is interested. I don't think there is even a trust created.

Joint bank accounts don't work the same as joint ownership of real estate. With real estate, a court order is needed when a joint owner doesn't agree to a transfer of ownership agreed to by the other joint owner. That's not the case with joint bank accounts.

Any of the owners of a joint bank account can withdraw the money on his/her own, including the owner that funded the account. If the funding owner has both full beneficial ownership and is a legal owner with full transaction capability, what could the other joint owners be holding in trust while the money remains in the joint account?

The resulting trust cases I've seen are about after the funding owner loses legal title to the money either by being removed from the joint account's title after death or after another joint owner takes money out of the joint account.

@bhuc, re: accountant's opinion:

You seem to be making a clear distinction between someone who is managing an account for someone else and whose name is on the account, versus someone who is on the account solely to circumvent probate tax.

In many cases, however, the secondary owner fits into both categories, i.e. is managing the account while the primary is alive but also will inherit the money when they die. How are we to view this situation?

If one is solely managing an account, not going to inherit it, then surely the appropriate tool is a POA, not a joint account with possible trust complications and which could create a hornet's nest for executor?

Do spousal joint accounts need to be reported as bare trusts?

Norman1, I agree with you. Maybe CRA wording re bare trust should be "means a trust where the trustee has SOLE legal ownership of the property....."

For example an individual who owns a property and registers it in the name of a numbered company would usually create a bare trust situation.

But a parent adding a child to a joint account may create a regular (not bare) trust, the child is operating as trustee of parent's funds, at least according to some experts, and these new rules apply to all trusts, not just bare trusts.

CRA on its own wouldn't add new boxes to the T5 unless the gov't indicated a new interest in joint bank account owner info, and apparently that's not the way the gov't wanted this to go. It's curious to me that they're not clarifying this very common situation, maybe they want uncertainty?

But the consensus on here seems to be that these joint accounts are likely not going to be caught in the new rules, and are not really of interest to the government, guess we'll find out. Maybe someone can phone CRA and ask for a trust account number for filing a T3 Return because they've been added to a parent's bank account and see if CRA will give out a trust account number in that case.

As was suggested in another forum, the big accounting firms will have gotten this figured out on a national scale. It is probably best to lean on them for clarification rather than from those in anonymous forums.

Norman1, I guess the TD video lady disagrees with you, she said, based on the various experts she's been talking to for months, that adding a child to a parent's account could result in a trust that is subject to the new requirements. And that situation would seem, if it is a trust, to be an express trust based on EY Canada's definition you cite.

Just noticed on a T slip I received for a joint account, the secondary name is also on the slip so CRA does know who else is joint, though no SIN shown for secondary, but also the new T3 Return Sch 15 shows more comprehensive info re the joint owners.

I agree, in that case, different situation, obviously a gift.

The concern on here has been the specific, common case where a parent adds a child in order to manage the parent's finances because parent is too old to want to do it for themselves, TD video indicates that situation may fall into new rules.

Bill said
The concern on here has been the specific, common case where a parent adds a child in order to manage the parent's finances because parent is too old to want to do it for themselves, TD video indicates that situation may fall into new rules.

Is the parent actually trying to set up something that is a trust when he or she make the account joint with the child and just instructs the child to pay the parent's bills and other expenses through the account?

That sounds more like an appointment of a limited attorney than creation of an express trust and appointment of one of its trustees.

The parent would be setting up an express trust when he makes the account joint with the child and instructs the child Alice to pay his bills and other expenses through the account while he is alive and to distribute, after his death, the remaining funds equally between a charity and cousins Bob and Cindy. Those are the kinds of situations, like in Lowe Estate v. Lowe mentioned earlier, that have been confirmed by courts.

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.

If that were a trust, then both joint account owners are trustees. That's because both are legal owners of the account eventhough only one signature may be needed to transact. Kind of a like a trust with two trustees and only one trustee's signature is needed to transact.

That isn't the same as joint tenant ownership of land where the second owner's approval is needed on transactions.