Compliance
Trust Reporting and the 21-Year Rule: What Trustees Must Do Now
Recent changes to the 21-year deemed disposition rule mean many trusts need to revise reporting and tax-planning structures.
By NomadicTax Research Team • 6-8 min read • September 8, 2026
## The 21-Year Rule in a Nutshell
- Under **subsection 104(4) of the Income Tax Act**, **personal trusts** must realize accrued gains every 21 years (a “deemed disposition”) to avoid indefinite tax deferral. ([canada.ca](https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/mandatory-disclosure-rules-overview/notifiable-transactions-designated-by-minister-national-revenue.html?utm_source=openai))
- Budget 2025 introduced amendments (particularly **subsection 104(5.8)**) to ensure that **indirect trust-to-trust transfers** (via a Holdco or similar) don’t reset the 21-year clock. New trusts inheriting property under these rules must assume the 21-year anniversary of the original trust. ([budget.canada.ca](https://budget.canada.ca/update-miseajour/2026/report-rapport/pdf/update-miseajour2026-eng.pdf?utm_source=openai))
## What’s Changed:
- **Indirect transfers**: If a trust transfers property tax-deferred to a beneficiary (e.g. a corporation) and another trust holds that corporation, the 21-year date of the transferee trust becomes that of the original trust. ([fin.canada.ca](https://fin.canada.ca/drleg-apl/2026/nwmm-amvm-0526-n-2-eng.html?utm_source=openai))
- **Effective date**: These changes apply to transfers occurring **on or after November 4, 2025**. ([budget.canada.ca](https://budget.canada.ca/update-miseajour/2026/report-rapport/pdf/update-miseajour2026-eng.pdf?utm_source=openai))
## Compliance Rules for Trusts
Trustees and trust administrators should note:
- **Schedule 15 (Beneficial Ownership Information)** must be filed with the **T3 Trust Income Tax Return**, except for certain trusts with assets below thresholds. Bare trusts may be exempt until specific dates. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/tax/trust-administrators/t3-return/filing-trust-return/what-changed.html?utm_source=openai))
- Starting **tax years ending on or after December 31, 2025**, trusts with **FMV ≤ $50,000** (or ≤ $250,000 in certain assets) and meeting conditions may avoid filing certain detailed schedules. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/tax/trust-administrators/t3-return/filing-trust-return/what-changed.html?utm_source=openai))
## Examples
| Scenario | What happens under new rules |
|---|---|
| A trust (Trust A) owns shares in a corporation, transfers property to the corporation, and a new trust (Trust B) owns the corporation after Nov 4, 2025 | Trust B inherits Trust A’s 21-year anniversary — cannot reset to later date. |
| Bare trust holding investment accounts under $250K in FMV for a year ending Dec 31, 2025 | Likely exempt from filing Schedule 15 with T3 for that year. |
## Action Steps
1. **Review trust structures** to identify whether any indirect transfers have occurred since November 4, 2025. Adjust planning accordingly.
2. **Check asset values and types** to see if Schedule 15 can be avoided under statutory thresholds.
3. **Update trust documentation** and file required returns by deadlines. Many trust tax years end December 31 — T3 return due 90 days after fiscal year-end.
4. **Consult advisors** if planning trust-to-trust or trust-to-corporation transactions — new rules limit avoidance techniques.
**Takeaway:** Casual trust restructuring or use of holding corporations no longer reset the 21-year clock. Trustees must be transparent, compliant, and deliberate in structuring transfers and reporting.