As of December 31, 2024, CRA has new rules regarding “bare trusts.”
What is a bare trust? A bare trust is a specific kind of trust in which the trustee has no obligation other than to deal with the trust property as instructed by the beneficiaries. The legal title of the trust property is held by the trustee, but the beneficiary has the beneficial ownership of the property. A bare trust is essentially a principal-agent relationship, which means the beneficiary of a bare trust has complete control over the trustee’s action as it relates to the trust property and the trustee has no independent power, discretion, or responsibility over the property. Bare trusts are commonly used to:
New Filing Requirements:
Filing Process: If you need a trust account number, visit our Trust Account Registration online service within: The processing of trust returns is divided between the Winnipeg Tax Centre and the Sudbury Tax Centre as stated below: Sudbury Tax Centre If the trust resides in New Brunswick; Nova Scotia; Prince Edward Island; Newfoundland and Labrador; or the remainder of the provinces of Ontario and Quebec not listed below under “Winnipeg Tax Centre.” Send your return to: Sudbury Tax Centre T3 Trust Returns Program 1050 Notre Dame Avenue Sudbury ON P3A 6C2 Winnipeg Tax Centre If the trust resides in Manitoba; Saskatchewan; Alberta; British Columbia; Northwest Territories; Yukon; Nunavut; Hamilton (Ontario) and surrounding areas; Kitchener-Waterloo (Ontario) and surrounding area; Laval (Quebec) and surrounding area; Montréal (Quebec) and surrounding area; or Sherbrooke (Quebec) and surrounding area. Send your return to: Winnipeg Tax Centre T3 Trust Returns Program PO Box 14003, Station Main Winnipeg MB R3C 0N8 If you have questions about resident trusts, call 1-800-959-8281. Despite everything going on the world; geopolitical conflict, climate change, elections, interest rates etc., the markets continue to climb. Throughout history, there's always a reason not to invest your money. See below for a list of reasons, dating back to the Great Depression.
The First Time Home Savings Account (FHSA) has officially been approved and is available for enrollment. Please forward this to anyone >18 who does not own a home but plans to at some point.
Bottom line:
FHSA Details: Eligibility:
Contributions:
Withdrawals:
FHSA parameters:
Financial Planning Strategy:
How to set up an Account
Click here for a video summary on the FHSA. Let us know if you have any questions. The failure of SIVB has caused a lot of fear in the markets over the past few days. What is becoming clear is this is a concentrated bank “failure” that shouldn’t extend beyond a few small, regional banks in the US.
It was a sigh of relief for SIVB customers today who, according to Bloomberg, will have access to all of their money. The Fed, Treasury Department and Federal Deposit Insurance Corp. confirmed a joint statement that they would essentially provide a backstop. It’s important to note that the problem Silicon Valley Bank faces today is VERY different than the 2007-2009 banking crisis. Also, the good news – bonds have rallied. See below explanation and click here for a Third Party Visual. (source: Fidelity) SIVB was thriving. Credit losses were fairly low. Its deposits TRIPLED from 2019 to ‘21. How’s that a problem? It sounds great, right? Well… 1. When banks accept deposits from clients, they owe the clients that money. So deposits are liabilities to the bank. Liabilities cost money… “cost” both to serve those clients (costs associated with branches, tellers, technology etc.) and any interest the bank pays the client on the checking account (deposit). 2. To pay for the cost of those liabilities, banks turn them into assets: lending deposits out; as small business loans, mortgages, lines of credit, etc. If a bank can’t lend deposits responsibly, it often uses excess to BUY conservative loans or “securities,” like US Treasuries & Mortgage Backed Securities (MBS). 3. As mentioned above, from 2019-2021, the deposits at SIVB tripled! 4. SIVB knew it couldn’t lend those responsibly - it was too much, too fast. Much of the money was from Venture Capitalist-backed companies that needed a place to deposit the $ they raised. Those are big deposits. Keep in mind the FDIC only insures $250,000 per customer per bank. 5. Deposits were pouring in too fast to lend responsibly. SIVB recognized that. Rather than make dumb loans, SIVB bought assets guaranteed by the US government - Treasuries and MBS. BUT, it bought 10+ year bonds. Mistake! 6. When interest rates rise, bond prices fall. A general rule of thumb is for every one year of “duration,” each 1% interest rate move impacts the price of the bond by: 1% x Duration A. So a 1% move on a 9 yr duration bond is ~9% +/- on the bond price. But banks are levered… 7. Remember: banks generally acquire assets by using deposits (liabilities) as the capital source. And banks like SIVB are levered 10:1 or more: owing $10+ for every $1 of shareholder equity. If you’re levered 10x, a 10% loss on assets is a 100% wipeout. 8. So SIVB bought high quality assets, but it bought tons of them with LONG duration at LOW interest rates. When the Fed raised rates, those assets declined in value. 1% x Duration. Those losses, multiplied through the leverage at SIVB, caused a big problem! 9. SIVB now has a mark-to-market hole (loss on paper) on its balance sheet. But it’s not taking loan losses like subprime defaults where borrowers can’t repay. In this case, the borrower is the US Government! It’s “just” mark-to-market: as long as its liabilities are sticky (ie, depositors leave their money at SIVB), it will ultimately be fine. But that’s a big “if.” 10. Technically, if all the depositors ask for their $ back at once, SIVB needs to sell those bonds at the mark-to-market value, crystallizing what could have been a temporary loss. And if those losses are big enough, SIVB may not have enough money to pay out all depositors. 11. But that situation rarely happens. The FDIC and FHLBs exist to limit this. However, once it starts, game theory kicks in: NOBODY wants to be the last depositor at a bank. We all can picture what happens… 12. Which brings us to today. SIVB has large depositors. Large depositors aren’t fully insured by the FDIC - they have an incentive to find HIGHLY sound banks (ie: move their money from SIVB). Once a whiff of issue pops up, large depositors run… one might say they, “bank run.” 13. As a bank’s deposits go in reverse, it has to sell assets. The bank raises money. The FHLB steps in to help turn its less liquid assets into more liquid. Reassuring utterances are made. But is it enough? Put yourself in a large depositor’s shoes: what would you do? Bottom line – this is VERY different than 2008-2009. However, although the FDIC has attempted to avoid the Herd mentality (a bank run), some depositors will still “run,” causing issues for SIVB (and other similar small, regional banks in the US). Situations like this remind us all how different (and strong) the Canadian banking system is, but also how vulnerable the entire financial system is to rising interest rates.
Good Morning,
And just like that, we are well into Q4 2022. Happy Hallowe’en to you and your families! Market Returns (as at October 28th, 2022) Good Morning,
Happy Fall to you and your families. We hope you’ve settled in nicely to your post-summer routines. Market Returns (as at September 29th, 2022) Good Morning,
And just like that… it’s the end of August! We hope you and your families had a fabulous Summer and are geared up for the Labour Day Long Weekend! Market Returns (as at August 30th, 2022) |
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