The recently implemented Corporate Transparency Act (the “CTA”) requires that certain entities report information about themselves and their “beneficial ownership” to the Financial Crimes Enforcement Network of the United States Department of the Treasury (FinCEN).

Congress passed the CTA as a part of the worldwide effort to combat money laundering, tax evasion, and other illicit activities. The reporting requirements of the CTA mainly apply to smaller entities seen as having the highest risk of abuse because they are not otherwise subject to oversight. While there have been legal challenges to the CTA, FinCEN has indicated that it will continue to enforce the CTA while these challenges are ongoing.

This Q&A addresses the potential impact that the CTA may have on estates and trusts, and will be helpful to settlors, trustees, executors, and beneficiaries of trusts, as it outlines their basic duties under the CTA.

Q: Do I need to be worried about the CTA and reporting information to FinCEN?

A: The CTA applies to “reporting companies” and their “beneficial owners.”

A reporting company is an organization that was created by filing a document with the secretary of state, or similar office, under the laws of that state, or foreign organizations that do business in the U.S. Generally, a reporting company will be a corporation or a limited liability company (LLC). Under the CTA, there is a list of exempt organizations that are not required to report to FinCEN, including public companies, large operating companies, and 501(c) organizations.

A beneficial owner is someone who directly or indirectly owns or controls 25% or more of the entity’s ownership interests, or someone who exercises substantial control over the entity, like a senior officer or a director.

Thus, if you directly or indirectly own a 25% or more ownership interest in a reporting company, such as an LLC, the CTA will impact you. In the world of estate planning, this is highly relevant for individuals who, as a part of their estate plan, have created an LLC or hold ownership interests in a reporting company in their trust. This is also relevant for trustees of trusts and Executors of estates.

Q: Is my trust subject to the CTA?

A: A trust by itself is not subject to the reporting requirements under the CTA (unless a trust has filed with the secretary of state, which is not necessary in Connecticut). However, if a trust holds a 25% or more ownership interest in an organization that is subject to the CTA, information about certain individuals involved with the trust must be reported to FinCEN by the reporting company.

If a trust has a beneficial ownership interest in an organization subject to the CTA, information about the following individuals must be reported by the reporting company: (1) the trustee* of the trust or other fiduciary with authority to dispose of trust assets; (2) a beneficiary who is the sole permissible income and principal beneficiary of the trust, or a beneficiary who may effectuate the disposition of substantially all of the trust assets; and (3) a settlor of a trust who has the right to revoke the trust or otherwise withdraw trust assets.

*If the trustee is a corporate trustee, it is not entirely clear whose information should be provided, and FinCEN has not provided guidance on the issue. For the time being, we recommend simply listing the name of the corporate trustee, and not the individual trust officer.

Q: What should I do if I am an executor of an estate of an individual who was a beneficial owner of a reporting company?

A: If the decedent was a beneficial owner of a reporting company because they owned 25% or more of the company’s ownership interests or held any other rights that transfer on death, a change in beneficial ownership is not considered to occur until the estate is settled. Thus, while the estate is still open, there is nothing for the executor to do in connection with the CTA. After the estate is settled, the executor should inform the reporting company of the new beneficial owners so that the reporting company may then update the report with FinCEN.

Q: What information needs to be reported to FinCEN?

A: The reporting requirement under the CTA entails three parts: (1) company information, (2) beneficial owner information, and (3) company applicant information, if applicable.

• Company information includes the company’s full legal name; any trade name of the company; the street address of the principal place of business in the United States; the state of formation; and the tax ID number.
• The beneficial owner information includes their full legal name; date of birth; residential street address; ID number and issuing jurisdiction of a U.S. or foreign passport, U.S. driver’s license, or other U.S. government issued ID; and an image of such ID. If a beneficial owner is exempt from the reporting requirements of the CTA, the only information that needs to be reported is the name of the exempt organization.
• The company applicant (i.e., for companies formed in 2024 and after, this is the person who filed or directed the filing of the formation/registration documents of the company) information includes the same information as the beneficial owner, as well as the business address of the company applicant if forming companies is part of their ordinary course of business.

An individual, such as a beneficial owner, has the option to provide their information to FinCEN directly and receive a FinCEN identification number. The individual can then provide this ID number to the reporting company when it is time for the reporting company to file its initial report. This may be advantageous for those who have a beneficial ownership interest in numerous reporting companies.

Q: How is an initial report filed with FinCEN?

A: The reporting company is responsible for ensuring that the initial report is filed, so there is no responsibility for a beneficial owner beyond providing the necessary information to the reporting company. The reporting company, or someone on behalf of the reporting company, will gather the necessary information described above. Then, the report will be electronically filed on the FinCEN website.

Q: What is the deadline for filing with FinCEN?

A: If the reporting organization was created before January 1, 2024, it has until January 1, 2025, to submit its initial report with FinCEN. If the reporting organization was created in 2024, it has 90 days to file. For organizations created in 2025 and beyond, they will have 30 days to file. After the initial report, any change of information must be reported within 30 days of the change.

We recommend that to avoid any last-minute problems, the reporting company not wait to collect the necessary information and submit the initial report at least a few days or weeks before the deadline.

The CTA is highly complex and there are many aspects of it that may still be clarified. 

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