The Corporate Transparency Act (CTA), which went into effect January 1, 2024, may have an impact on trusts. Under the CTA, a trust that meets the definition of a “reporting company” must file a beneficial ownership information (BOI) report with the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).

The CTA requires the reporting of personal information about every individual who meets the definition of a “beneficial owner” of a reporting company. That includes not only the beneficial owners of a trust that is a reporting company, but also the beneficial owners of a reporting company that is owned or controlled by a trust. Civil and criminal penalties can be imposed on a reporting company and on individuals for violating the CTA’s reporting requirements.

And the deadline for filing is quickly approaching.

The CTA requires owners and operators of companies formed prior to January 1, 2024 to report beneficial ownership information with FinCEN by January 1, 2025.

Businesses subject to the reporting requirements of the CTA have to collect and report certain ownership information for each “beneficial owner” of the company, i.e., individual(s) who own 25% or more of the company or who exercise “substantial control” over the company.

The process of identifying the individuals who must report beneficial ownership information is straightforward for the most part in single or multi-member organizations where all the beneficial owners are individuals.

It can become much more complex when the reporting company is owned by a trust. Reporting companies, wholly or partially owned by a trust, must consider whether that trust triggers an ownership information filing obligation and, if so, which individuals connected with such trust (trustee, beneficiary, or grantor) need to report their information.

Generally, where a trust owns more than 25% of a reporting company, information for the following individuals may need to be reported:
(1) a trustee with authority to dispose of trust assets,
(2) a beneficiary who:
(a) is the sole permissible recipient of the income and principal from the trust, or
(b) has the right to demand a distribution of substantially all of the assets of the trust, or
(3) a grantor or settlor who has the right to revoke the trust or withdraw the assets of the trust.

The attorneys at Abrahams Kaslow & Cassman LLP are prepared to guide you through the requirements of the CTA, provide information on the most recent legal and legislative developments related to the CTA, and file beneficial ownership information reports with FinCEN on behalf of your company.

Contact Alex at [email protected] for more information.