2024 February Update

Happy Year of the Dragon!

If you’ve been wondering what is up with your accounting team in the last few years, we want to encourage you to cut them a bit of slack. Since 2018, there have been a lot of changes in tax regulation and increased filing requirements. They’re learning at a rapid pace, and honestly, they were pretty busy before.

This year, we’ve all got yet another change, and much like other recent changes, it’s confusing everyone.

New Trust Reporting Requirements: Not Just for Rich People

You may say to yourself, “I don’t have a trust, those are only for billionaires. This won’t apply to me.”

But wait… it might.

There are formal or express trusts which, if you have these, you hopefully know they exist. These might be Family Trusts, Alter Ego or Joint Partner Trusts, Spousal Trusts, Disability or Henson Trusts, and other trusts with official names that your accountant and lawyer set up for you. Ideally, if you have these, you are already filing tax returns on an annual basis and know what is required. If not, please do contact your accounting team today.

The new trust requirements significantly impact the other kind of trust – the one you didn’t realize was considered “a trust”.

Bare Trusts, Naked Trusts, Trusts You Didn’t Know You Had

A “bare” trust, sometimes called a “naked” trust, and sometimes not even referred to as a trust, is actually pretty common in Canada.

It’s an arrangement where one person or company or other entity (the trustee) holds assets for another (the beneficiary). The assets or money or real estate is meant for the beneficiary, but perhaps the trustee is named on title and/or has management responsibilities.

These kinds of trusts can exist for so many reasons, including the following:

• Gifts to a minor child or children with property who can’t hold legal title
• Easier management of assets on behalf of a family member who might need support or with the goal of reducing probate fees in an estate
• Minimization of land transfer taxes
• Desire for anonymity on public records, such as land registration records
• Efficient transfers of property during corporate reorganizations

Here are some scenarios that might sound familiar:

• You may have chosen to open an “in trust” or ITF account for your minor child, to save and invest money on their behalf until they reach the age of majority.
• You may have added an adult child to your bank account or on the title of your real estate to help you with ongoing management and avoid probate fees when you pass away.
• You may hold the title of your principal residence in the name of just one spouse, though the other spouse is a “beneficial owner”. This could be in place for a myriad of reasons, including a goal of reducing liability and avoiding U.S. capital gains taxes on sale and U.S. estate taxes on death.
• You may have opened up a bank account to hold funds on behalf of your corporation. Your corporation might be on title for real estate, a vehicle, or other assets that are truly meant for the shareholders’ personal use.
• You might have assets registered to one corporation but owned by another. You may be in real estate development and may have been using “nominee” corporations.
• You, a partner, or a partnership may be on title for a bank account that is for the benefit of all the other partners in that partnership.

What If I Might Have a Trust?

The best thing you can do right now is contact your accountant as soon as possible, and let them know you think you might have a trust reporting requirement.

Bare trusts that have been in existence for less than three months or that hold less than $50,000 in assets throughout a tax year might be exempt from reporting.

This reporting requirement is not about collecting taxes. You are unlikely to experience any additional tax costs, though sadly you will incur professional fees, as accountants aren’t working for free these days. If you don’t file, however, you are in danger of paying penalties that can become significant over time.

The purpose of this reporting seems to be about transparency, which is a worldwide theme that is being discussed regularly at global tax and legal conferences. Governments around the world want to know who owns what, and they’re asking all of us to report that ownership more and more frequently.

We’ve seen this with BC’s Land Owner Transparency Registry, and we suspect that this theme is not going anywhere for a long time.

Important Dates for the 2023 Tax Year

• February 19: CRA’s netfile service for 2023 tax returns available
• February 29: Last day to make an RRSP contribution for the 2023 tax year
• April 2: T3 Trust filing (90 days after year end, usually March 31, but thanks to the Easter holiday, slightly extended)
• April 30: Last day to file 2023 income tax returns without a late filing penalty on balances owing, and if you or your spouse does not have self-employment income. Also, last day to pay the balance owing on any taxes, so it does make sense to get your taxes completed long before this, especially with how busy accountants are with all the new trust tax filing requirements. Also, last day to file a tax return without penalty for the Underused Housing Tax for the 2022 tax year
• June 15: Last day to file a 2023 income tax return without a late filing penalty if you or your spouse has 2023 self employment income. Note that your taxes for 2023 would have been due April 30, regardless of whether you’re self-employed or not.

We’re not accountants at Spring Planning but we work with them a lot to help you with your tax planning. Please see the Practice Notes section regarding the 2024/2025 Income Planning season. We want to make sure we’re securing room for you if you expect to receive support. We found that we were pretty heavily booked … and maybe a little overbooked… in fall 2023 and are hoping to be very well prepared for this year!

Your Spring Planning Team

Practice Notes:

It’s time to start booking our Income Planning and Annual Review season! It starts wa..ayy out there in fall, which might seem a long time from now, but we know our calendars will book up quickly, and we want to make sure we have saved space for you.

If you know that you will want to arrange an Income Planning and/or Annual Review session and don’t have this scheduled yet, please contact Ashlee at [email protected] to secure a spot in our calendars so we can be there to increase your confidence in your financial goals.

What is Income Planning and Annual Review Season?

We’ve been lucky enough to have clients who want to come back on a regular basis for “tweakments” on their plans. This might be every year, every other year, or another cadence that works for you. During this season, we are focused on:

• Reviewing the progress towards your goals as set out in your original plan
• Adjusting the trajectory based on realities and helping you make great decisions
• Getting the nitty-gritty about current and next year income, particularly for those taking income from their investment portfolio and corporations: What’s the most tax-efficient approach with this year’s income? What are you spending next year? What amounts will you draw, given your spending and all the intricate rules around each source of income. These meetings are very important to book in the window between October 15 and December 15 to ensure we have enough time to collaboratively inform and engage in discussions regarding the outcomes with investment managers and accountants.
• Determining how much to allocate to your RRSP before the deadline. This is often helpful for those people who have pensions and/or group RRSPs with regular contributions throughout the year. These meetings should be booked each year between January 15 and February 15.

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Julia will be in Toronto throughout the last week of February, attending board meetings and visiting people in that part of the world. On March 5, she’ll be speaking at the CPA Ontario Women in Action Conference and on March 14 hosting Preet Banerjee’s presentation on the Value of Advice (his thesis!) at the Financial Planning Association of Canada’s public education event.

Our offices will be closed for the Easter Holidays, starting Friday March 29, and we’re even taking Easter Monday off on April 1.

‘Free’ Fridays remain booked permanently in our calendars. These days are free to us at Spring because they are our opportunity to work on becoming better planners, whether through collaboration and discussion, education, research, or even a little down time. It’s been a regular practice since the summer of 2017, and we will continue to set aside the time to become better versions of ourselves every week. Even 1% better is solidly worth it because we know that will be reflected in the work we do for you.

Spring in the News:

Julia spoke with the Globe & Mail about Canadian seniors staying in their houses far longer than ever before and the reasons why this is becoming more and more common. Read the full article here.

A regularly occurring event in Julia’s calendar includes good conversation, great company and a some mahjong with the Joy Luck Club. The Globe & Mail asked Julia to write an article about the club she help found six years ago and why it’s so much more than just a game. Read the full article here.

Julia will be presenting at the upcoming CPA Ontario Women’s in Action Conference. Join her on March 5th at 1:20pm on a Fireside Chat about Money & Finance. Check out the full event here.

On March 14th at 1pm EST / 10am PST, Julia will be hosting an FPAC Public Educational Event: A multi-dimensional analysis of the value of financial advice to households in Canada featuring  Dr. Preet Banerjee. Register in advance for this event here!

Please check out our media page here for videos, podcasts, interviews and more.

Planning News Digest:

• There is actually one thing that the concept of “manifestation” gets right, but it’s missing a few things to make it complete. Care to guess what that is… given this podcast from No Stupid Questions is being recommended by Spring Planning? Listen to the full podcast here.
• If you’re lucky enough to be earning income in the top marginal tax bracket in your province, the tax on that top layer of income has increased over the past decade. A little history as to how and why is in this article. Important Note: Your marginal tax rate is not the same as your average tax rate. Your marginal tax rate is the highest rate you pay on the next $1 of income. Literally the first line in this article is misleading because of this, but the rest of it is good… for people who like reading about tax rates. The full article is available here.
• The federal government has offered to increase forgivable loans for some students as Canada’s severe doctor shortage continues to worsen as the population grows and physicians retire. To draw more practitioners to areas where the shortage is particularly acute, Ottawa is offering a 50 per cent increase in forgivable loans for doctors and nurses who work in rural and remote communities. Read the full article here.

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