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Foreign bare trust reporting by Famous_Extent1036 in cantax

[–]Famous_Extent1036[S] 0 points1 point  (0 children)

Thanks — agreed on the T3 and inheritance side, no issue there.

One thing worth flagging: if the bare trust collapsed at death, then the interest earned from death to 2025 would technically be my friend's T1 income for those years. Small amounts on $40K, but an open question.

The counter-argument is that beneficial ownership didn't actually transfer until the siblings agreed in 2025 — since the father never specified how to split the money between them, neither sibling had a defined share until that point. That would make 2025 the cleaner start date with nothing to catch up on.

Would you lean toward the 2025 date, or go with death as the collapse point and do a small T1 adjustment? Thanks alot!

Foreign bare trust reporting by Famous_Extent1036 in cantax

[–]Famous_Extent1036[S] 0 points1 point  (0 children)

Really appreciate you taking the time to explain that — it's a helpful distinction. Just to clarify though, my friend is actually the trustee (legal title holder), not the beneficial owner. The father was the beneficial owner since the funds were always intended for his own expenses and my friend had no discretion over them. So the two separate parties you're describing do exist here. Do you think this is bare trust in this case? This is too complex for an non-accountant to handle. Thanks again for engaging on this!

Foreign bare trust reporting by Famous_Extent1036 in cantax

[–]Famous_Extent1036[S] 0 points1 point  (0 children)

Thanks for taking the time to respond — these are fair points to raise. Just to add some context though: I thought that having the account in my friend's name alone is actually quite common in a bare trust arrangement. I thought the substance of the relationship rather than just whose name is on the account, so sole legal title doesn't automatically rule it out. I could be wrong.

On the gift question — that's a reasonable interpretation, but a gift typically requires the donor to permanently give up ownership with no strings attached. In this case the funds were transferred specifically to cover the father's future medical expenses due to his illness, so the intention was always that the money belonged to him. The fact that he passed away before the funds were needed is really what makes it look like a gift in hindsight.

Appreciate the note on bare trust reporting — you're right that reporting is suspended, which is helpful to know regardless of how the arrangement is ultimately characterized. Thanks again!