Simple can be powerful. The key is knowing who really owns the money, who pays the tax, and when control changes hands.

When most Canadians hear the word “trust,” they picture complicated legal structures, expensive lawyers, and wealthy families moving millions of dollars behind the scenes. But trusts are not only for the ultra-wealthy.

For parents and grandparents, two much simpler arrangements can sometimes help organize ownership and build wealth for the next generation: a bare trust and an informal “In-Trust For” (ITF) account. They can be practical and cost-effective, but simple does not mean consequence-free. Tax attribution, documentation, beneficial ownership, estate treatment, and the child’s eventual control all matter.

SAGE PERSPECTIVE The goal is not to create the most sophisticated structure. It is to choose the simplest structure that still gives your family the ownership clarity, tax treatment, and control you actually want.

At a Glance: How the Two Arrangements Differ

Feature	Bare Trust	Informal “In-Trust For” (ITF)
Primary use	Separating legal title from beneficial ownership, often for real estate or nominee arrangements.	Holding and investing money for a minor through a bank or brokerage account.
Who benefits	The beneficial owner retains the economic ownership of the property.	The child is intended to be the beneficiary if a valid gift or trust has been created.
Trustee control	Very limited. The trustee generally acts as agent or nominee and follows the beneficial owner’s instructions.	The adult manages the account while the child is a minor, subject to the arrangement and provincial law.
Documentation	A written bare trust or nominee agreement is strongly recommended to document beneficial ownership.	Often opened using the financial institution’s forms. Clear records of the contributor, gift intention, trustee, and beneficiary are important.
Tax treatment	Income, capital gains, and losses are generally reported by the beneficial owner.	Income from property transferred to a related minor may attribute back to the transferor; capital gains are generally not attributed under the related-minor rule, subject to exceptions.
When control changes	Driven by the beneficial owner’s rights and the underlying agreement.	If the child has vested beneficial ownership, they may be entitled to control the property once they reach the age of majority.

1. Bare Trusts: Who Actually Owns the Asset?

A bare trust is a trust arrangement in which the trustee holds legal title, but has little or no independent power over the property. For Canadian income tax purposes, the CRA generally describes a bare trustee as someone who can reasonably be considered to act as agent for the beneficiary in dealings with the trust property.

Put simply: the name on the title and the person who truly owns the economic value can be different. The trustee may be the registered owner on paper, while the beneficial owner keeps the real rights, risks, and rewards of ownership.

Why families may consider one

• Administrative convenience. A bare trust can allow one person to hold registered title or an account on behalf of the true beneficial owner, where appropriate.
• Ownership clarity. A properly drafted agreement can document who contributed the money, who is entitled to the asset, and what the trustee is – and is not – allowed to do.
• Tax reporting follows beneficial ownership. Income and gains from the property are generally reported by the beneficial owner, not by the nominee simply because their name appears on title.

REAL-LIFE EXAMPLE  |  Ali’s Property Purchase The situation: Ali is buying an Ontario rental property but wants his sister to hold registered title for administrative and privacy reasons. The approach: With legal advice, they sign a nominee or bare trust agreement confirming that Ali funded and beneficially owns the property and that his sister acts only on his instructions. What it means: Ali generally reports the rental income and capital gains. Lender, land-transfer, legal, tax, and T3 reporting consequences still need to be reviewed before the arrangement is implemented.

2026 CRA FILING ALERT Bare trusts were not required to file a T3 return for the 2024 or 2025 taxation years. For taxation years ending on or after December 31, 2026, certain “reportable bare trusts” will be subject to the trust reporting rules, with exceptions. Because the filing rules have changed more than once, the reporting obligation should be reviewed every year rather than assumed.

2. Informal ITF Accounts: Simple, Useful – and Easy to Misunderstand

An informal “In-Trust For” account is commonly opened by a parent or grandparent at a bank or brokerage for a minor child. The adult manages the investments while the child is too young to contract directly with the institution.

The important part is that the words “in trust for” on an account statement do not, by themselves, answer every legal question. Whether the arrangement creates a valid trust or an irrevocable gift depends on the documentation, the intention of the contributor, who controls the money, and the surrounding facts. Keeping clean records matters.

Why families may consider one

• Simple setup. Many institutions can establish an ITF investment account without the cost of a formal trust deed.
• A long runway for compounding. Regular gifts can be invested for many years, giving the child time to benefit from long-term growth.
• A clear family purpose. When the arrangement is properly documented, the account can make it easier to separate money intended for a child from the parents’ day-to-day assets.

REAL-LIFE EXAMPLE  |  The Grandparents’ Legacy Portfolio The situation: Arthur and Eleanor want to give their newborn granddaughter, Maya, a financial head start for education, a first home, or another major life goal. The approach: They open an ITF account, document the source and intention of each gift, and invest $5,000 each year in a diversified portfolio suited to the long time horizon. What it means: Over 18 years, regular contributions and compounding can build a meaningful pool of capital. The family still needs to understand the attribution rules and when Maya becomes entitled to control the money.

3. Two Blind Spots That Catch Families Off Guard

ITF accounts can be practical, but two issues deserve attention before the balance becomes large: who pays the tax along the way, and who controls the money when the child becomes an adult.

Blind Spot 1: The CRA Attribution Rules

A common assumption is that investment income in a child’s ITF account will automatically be taxed at the child’s lower tax rate. That is often not the case when a parent, grandparent, or other related person transfers money to a related minor.

• Interest and dividends. Income from the transferred property may be attributed back to the transferor and reported on the transferor’s tax return while the beneficiary is a related minor under the applicable rules.
• Capital gains. Under the related-minor attribution rule, taxable capital gains from a later disposition are generally not attributed back to the transferor, although other rules and exceptions can apply.
• Income on income. Income earned by reinvesting income that has already arisen on the gifted property may be treated differently. Good recordkeeping becomes especially important as the account grows.

SMART TAX TAKEAWAY Tax efficiency matters, but it should not drive the portfolio by itself. The investment mix should still be based first on the child’s time horizon, the family’s purpose for the money, and the level of risk you are comfortable taking. Growth-oriented assets may be tax-efficient in some ITF situations, but “tax-efficient” and “appropriate” are not always the same thing.

Blind Spot 2: Control at the Age of Majority

This is often the bigger surprise. If the child has a vested beneficial interest in the account, reaching the provincial age of majority can give them the legal right to demand control of the property. The exact result depends on the validity and terms of the arrangement and the law that applies, but parents should not assume they can keep indefinite control simply because they are the trustee.

REAL-LIFE EXAMPLE  |  The $80,000 Milestone The situation: Mark and Sarah invest $200 a month for their son, Ryan. By adulthood, the account has grown to roughly $80,000, which they hoped would help pay for professional school. The approach: Because Ryan is the beneficial owner, Mark and Sarah may no longer be able to impose new conditions once he is legally entitled to the funds. What it means: If Ryan chooses travel, a vehicle, or another priority instead, the parents may not be able to stop him. If you want control until age 25, 30, or later, an informal ITF account may be the wrong tool.

4. How Simple Trust Arrangements Can Support an Estate Plan

Bare trusts and ITF accounts are not complete estate plans on their own. Used properly, however, they can support a broader strategy by making ownership more intentional and by allowing some wealth to move to the next generation during your lifetime.

Lifetime gifting

A well-documented, irrevocable gift can move future growth to the next generation while you are alive. Where the child truly owns the property, the asset may fall outside the contributor’s estate, which can reduce the assets subject to provincial estate administration or probate fees. That result is not automatic – incomplete documentation or retained ownership can change the outcome.

Ownership clarity

Clear records can reduce confusion about who owns what. For every ITF or bare trust arrangement, keep the account-opening documents, contribution history, source of funds, tax reporting records, and any written trust or nominee agreement together with your estate documents. That paper trail can be just as important as the account itself.

SAGE PLANNING NOTE A trust account should fit your estate plan – not sit beside it as a separate idea. Your will, powers of attorney, beneficiary designations, corporate planning, and trust arrangements should all tell the same ownership story.

5. When to Keep It Simple – and When to Graduate

You do not need to start with a complicated structure simply because you want to build wealth for a child. If the dollar amount is manageable, the ownership intention is clear, and you are comfortable with the child eventually taking control, a simple arrangement may do the job very well.

As the stakes rise, the structure may need to change. A formal trust may be worth considering when the balance becomes significant, when you want control beyond the age of majority, when there are family-law or creditor concerns, when a beneficiary has special needs, or when the planning involves private corporations and succession. An estate freeze is a separate corporate succession strategy that may sometimes be used alongside a family trust – it is not simply a more advanced version of an ITF account.

Before You Open One, Ask These Seven Questions

• Who is the true beneficial owner? Make sure the legal title and the economic ownership are intentionally documented.
• Is the gift meant to be irrevocable? If you still expect to take the money back later, the arrangement may not accomplish what you think it does.
• Who reports the income and capital gains? Attribution rules can make the answer different for interest, dividends, and gains.
• When does the child get control? Know the age-of-majority implications before the account becomes large.
• What happens if the trustee dies or becomes incapable? Make sure your estate documents and account records address continuity.
• Could there be a T3 or Schedule 15 filing obligation? Trust reporting rules are evolving and should be reviewed annually.
• Would a formal trust better match the goal? If you need long-term control or advanced planning, simplicity may eventually become a limitation.

The Bottom Line

The best structure is not the one with the most legal language. It is the one that matches your family’s real goal. If your goal is to give a child a head start, protect clarity around ownership, and let time and compounding do the heavy lifting, a bare trust or ITF account may be useful. If your goal is to control how and when the money is used long after the child becomes an adult, you may need something more formal.

Start with the purpose. Then choose the structure.

General educational information only; not legal, tax, or investment advice. Trust law, age-of-majority rules, beneficial ownership, attribution, and filing obligations depend on the facts. Confirm the arrangement with your legal and tax advisors before implementation.

— Sabiha