Did you co-sign your kid’s mortgage? There are new tax reporting rules to know

If you’re part of a joint bank account or have co-signed a mortgage, you might be part of something called a “bare trust” agreement that many Canadians will have to file a tax return for in the coming weeks.

Bare trusts aren’t new, but this year is the first time the arrangements must be filed and reported to the Canada Revenue Agency (CRA) for the 2023 tax year. If the April 2 deadline isn’t met, some hefty penalties could apply.

“It’s very important that all Canadians really take a good stock of whatever bare trust they may have in their world and get compliant as soon as possible,” says Ameer Abdulla, a tax expert at Ernst & Young (EY).

Since the rule is new this year, many Canadians may be unaware that they have to file a bare trust return within the next few weeks.

Here’s everything you need to know:

Trust funds are commonly used by anyone looking to safeguard their assets upon their death or to provide protections for young or vulnerable individuals who receive the funds, called beneficiaries.

Bare trusts happen when someone legally owns an asset, but it technically belongs to someone else. The arrangement is essentially a separation of legal and beneficial ownership of a property.

Abdulla describes bare trusts as “when the legal ownership of a thing or a piece of property or an account does not match who is entitled to that property, that income or the gain on that property.”

The difference between a bare trust and other trust accounts is that the trustee in the former has no decision making power over the beneficiaries assets. The trustee only acts on the beneficiary’s instructions.

“For bare trust, I think a lot of them are typically innocent, like having an account for your minor child to hold birthday money, or