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Accounting for trusts in Canada comes down to one deadline and one choice. A trust with a December 31 year end files its T3 return by March 31, which is 90 days after year end, and it pays any tax owing on the same day. The choice is whether income stays in the trust or goes out to beneficiaries, because that decides who pays the tax and at what rate.
This page assumes you mean a family, estate or other legal trust, not a lawyer’s or accountant’s client trust account. The two share a name and little else.
What does accounting for trusts involve?
The CRA describes a trust as a binding obligation enforceable by law. In its T3 guide it puts it this way:
A binding obligation enforceable by law when undertaken.
CRA, T3 Trust Guide, canada.ca
A trust exists when someone intends to create it, there’s identifiable property, and there are beneficiaries. Once that’s true, the trustee has the paperwork. All of it.
The CRA’s T3 guide expects trustees to hold the support for every number on the return. That means the trust document, a list of the assets at year end, and the working for how income was split between beneficiaries. Keep the bank statements and sale records too. The general CRA rule is six years from the end of the last tax year they relate to.
Who pays the tax on trust income?
| Type of trust | How undistributed income is taxed |
|---|---|
| Inter vivos trust (set up during life) | At the highest marginal rate |
| Graduated rate estate | At graduated rates, for up to 36 months after death |
| Income allocated to a beneficiary | Reported on Schedule 9 and, in general, taxed in the beneficiary’s hands |
So a trust that keeps its income can face the top rate from the first dollar. A graduated rate estate gets a window. After 36 months that window closes, and the estate is taxed differently. The top trust rate differs by province, so check yours on the CRA’s rates page before you plan around a figure.
What does moving income to a beneficiary change?
Take a $20,000 capital gain, allocated to one beneficiary in Ontario. If that person has $20,000 of other income, the capital gains tax calculator shows $2,205 of extra tax, or 11.0% of the gain. If their other income is $90,000, the extra tax is $2,990.79, or 15.0%.
That gap is why trustees look at the beneficiaries before they file, not after. It isn’t a reason to push income toward someone without asking what they need. The trust deed says who can receive what, and the trustee has to follow it.
Dividends allocated out follow their own rules. Try them in the dividend tax calculator, and use the marginal tax rate calculator to see the rate on the next dollar for a given beneficiary.
Which reporting rules have changed?
Most trusts that file a T3 must now also complete Schedule 15, which lists the settlors, trustees and other controlling persons. The CRA’s 2024 notice applies this to tax years ending after December 30, 2023, and the T3 guide repeats that generally all trusts required to file a T3, other than listed trusts, must include the Schedule 15 information. The notice also says bare trusts (where the trustee only holds title for someone else) needn’t file the T3 or Schedule 15 for 2024, unless the CRA asks. The position for later years may differ, so read the CRA’s current trust reporting page before relying on that exemption.
T3 slips and the summary go in by the same 90-day deadline. A late return can bring a penalty, and the amount depends on the circumstances, so the CRA’s late-filing page is the place to check.
What does a trustee do each year?
A simple routine helps. Keep the trust’s own bank account, separate from anyone’s personal one. Record every receipt and payment as it happens. At year end, list the assets and their values, total the income by type, and decide, within what the deed allows, how much is allocated to whom. Then prepare the T3 and the slips, and keep copies. Doing a little each month beats rebuilding a year in March, and the beneficiaries will thank you when their slips arrive on time.
What if the trust is an estate?
An estate adds a probate step. In Ontario the estate administration tax on an $800,000 estate is $11,250, about 1.41%, according to the estate administration tax calculator. Assets with a named beneficiary or joint owner usually pass outside the estate and don’t count. Legal and executor fees come on top.
Mistakes that cost money
Forgetting the filing because “nothing happened” is the common one.
Another is leaving the allocation for after the deadline. A third is mixing the trust’s bank account with a trustee’s own, which makes the records almost impossible to support.
A fourth is losing track of who is a beneficiary. Names, addresses and SINs are needed for the slips, so collect them early and update them when something changes. Chasing a missing number in the last week before the deadline is how late returns happen.
When the trust holds property or complex investments, a chartered professional accountant with trust experience earns the fee. Ask them about Schedule 9 and Schedule 15 by name.
The sources behind this page
Deadlines, tax treatment and reporting rules come from the Canada Revenue Agency‘s T3 trust guide, its page on when to file, and its trust reporting notice for the 2024 tax year. The gain and probate figures come from this site’s calculators, using Ontario settings. This site isn’t connected to any government body.
Frequently asked questions
When is the T3 return due?
No later than 90 days after the trust's tax year end. For a December 31 year end that is March 31, and the balance owing is due the same day.
What is Schedule 15 on a T3 return?
It reports beneficial ownership information, such as settlors, trustees and controlling persons, for most trusts that file a T3. It applies to tax years ending after December 30, 2023.
Do bare trusts file a T3 return?
The CRA said bare trusts needn't file for 2024 unless it asks. We couldn't confirm later years, so check the CRA page.
Is a trust taxed at a lower rate than I am?
An inter vivos trust is taxed at the highest marginal rate on undistributed income. A graduated rate estate gets graduated rates for up to 36 months.
Is this about a lawyer's trust account?
No. We cover legal trusts such as family and estate trusts, and assumed that is what you meant.
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