A trust is a particular type of legal relationship that is often proven in writing and allows a responsible person (the „trustee“) to hold property on behalf of one or more other persons (the „beneficiaries“). Trusts are often established or „settled“ by a person (the „settlor“) through the preparation of a trust document during that person`s lifetime (an „inter vivos trust“) or by a will with specific terms and conditions to be applied after the death of the creator of the will (a „testamentary trust“). Inter vivos and testamentary trusts are used as a means of controlling the management and distribution of property and are a tool to minimize taxes, minimize disputes between family members and restrict access to funds for certain beneficiaries by establishing a means of control. These particular types of trusts are considered separate entities and must therefore file their own annual tax returns. In other cases, a trust may be more easily used to express an economic division of the property, and no separate tax return is required (this is a „bare trust“). Trusts can also be established by law enforcement (called „constructive trusts“). There is a possibility that government and the courts will provide more clarity as the transparency system evolves and the government and the courts provide more guidance. In the meantime, it may be a good idea for those whose trusts are inactive and no longer serve any purpose to consider dissolving the trust as soon as possible. For others, it may be necessary to seek legal advice to navigate the rules and determine their disclosure obligations. Again, there is no definition of „beneficial owner“ or „beneficiary“ in the legislation.
There is also no exclusion for situations where one person`s interest depends on the death of another person, resulting in additional uncertainty as to whether emergency beneficiaries should be disclosed. It is also unclear whether the term „beneficiary“ is intended to cover the same persons who have „beneficial ownership“ of shares in a corporation, or whether there is a distinction between these terms that could lead to the disclosure of different persons, depending on whether the assets are directly held by a trust or a corporation held by a trust. Presumably, the term „beneficiary“ would encompass a broader class of persons, since a person can be designated as a „beneficiary“ of a trust without having an interest or claim in a particular property belonging to the trust (p.B. because the property is held in favour of another beneficiary). Which begs the question: Are the days of simply owning a tax planning trust over? Anyone considering the future use or use of a cash trust must now absolutely consider the potential risk, especially if the primary purpose of the bare ownership structure is to minimize or, in some cases, defer the payment of land transfer taxes on the change of ownership in the land registry. A bare trust, also known as a bare trust, occurs when a person, the trustee, has only the legal right to ownership and has no other duty or responsibility as a trustee with respect to the property transferred to the trust. Another benefit of using a cash trust is that it also allows for greater flexibility in determining who can own the property. Instead of having to register a new person on the title every time they are added as the owner of the property, you can simply change who owns the shares of the simple trust company, which facilitates such a change. In its simplest form, a trust is created when one or more parties called trustees hold the legal interest in property in favor of another party, the so-called beneficiaries. Trusts can be used in a variety of situations, from caring for minor children in the event of the death of their parents, to holding the assets of wealthy families, to minimizing the tax treatment of income in corporate activities. In der Rechtssache Universo Home Construction Ltd.
v The Queen, 2019 TCC87 the taxpayer claimed that he was the „builder“ of a new house and that he was entitled to a new apartment discount from the buyer of the new home. The Excise Tax Act (Canada) (the „Act“) allows the payment of a new home rebate to a builder if the builder has agreed to pay or credit the new home discount to the purchaser of the new home. The only question before the Court was whether the taxable person was a `trader`. In this case, the parties have agreed that the taxpayer is entitled to the refund. The title deed was registered in the name of the spouse of the taxpayer`s shareholder. The spouse and taxpayer submitted a fiduciary return. The Crown challenged the validity of the fiduciary declaration, stating that the taxpayer had no interest in the property to qualify it as a „builder“ for the GST/HST rebate claim. The Crown asserted that the fiduciary statement was unenforceable for several reasons: there were two versions of the trust that turned it into unreliable evidence; it was more likely to have been executed by the signatories after the date of purchase; and, in any event, the date of execution could not be determined on the basis of the document or other evidence. In general, the Crown has stated that there are not enough tangible legal actions or actions that establish a trust or other as a whole. The absence of this evidence could not prove that Universo Homes was a builder who was entitled to the discount transferred under the law. The court ruled in favour of the taxpayer and concluded that he was a „builder“, regardless of the questionable status of the fiduciary declaration.
The Court concluded that it was the nebulous moment of execution that caused the confusion; it was not the declared effective date or the declared existence of certain certain certainties required for a trust. The court noted that there was significant evidence (other than the declaration of trust) consistent with the fact that the taxpayer was the beneficial owner of the property, even if it was not listed on the title. This evidence included: If you are not the legal and beneficial owner of the land interest, as trustee of a relevant trust, you must file a transparency report identifying the actual beneficial owner of the interest (p.B the child). In recent years, the provincial and federal governments have announced legislative and regulatory changes to combat money laundering, tax evasion and other financial crimes. Many of the legislative amendments include new rules to increase transparency by requiring additional disclosures about individuals who have a legal or economic interest in real estate or private corporations in British Columbia. When assets are held through a trust, there can be considerable uncertainty as to the extent of the disclosure required. This article discusses key British Columbia and federal laws that require trusts to disclose information about beneficiaries, settlors and trustees, as well as some of the issues related to the interpretation of these requirements. Specifically, it examines the transparency and disclosure rules that apply to trusts under the British Columbia Business Corporations Act, the Land Transfer Tax Act and the Landowner Transparency Act, and also discusses the new reporting and disclosure rules that will soon come into force under the federal Income Tax Act. The use of bare trusts to avoid land transfer taxes is a particularly useful method in B.C., where prices are high and PTT are substantial.
Nevertheless, it is always advisable to stay up to date on government policy. Both in B.C 2016 and 2018. Some steps have been taken to request information on beneficial ownership. While this may indicate regulatory intent, the use of bare trusts for this purpose has not been eliminated and remains a viable option. Another point to note is that the laws on the application of the PTT and LTT vary from one municipality and province to another. Your first step should be to ask your estate planning firm if this is the right strategy for you. In cases where the land is held in an alter ego trust and a bare trust is the trustee of the alter ego trust, the trustee of the bare trust would file a transparency report identifying the beneficial owners. As of September 17, 2018, the new Real Estate Transfers Tax Return, which must be prepared for all transfers of ownership, requires individuals to report additional information when a transaction is structured through a corporation or trust.
According to the government, the intention of the change is to identify people with a significant interest in the property. .