Get ready for an interesting twist in the world of legal and business news. In 2020, the Corporate Transparency Act was passed to combat money laundering, financial transparency and a host of other issues to make it more difficult for money to flow into the United States. It was quite the undertaking to coordinate several agencies and took several years. Now the time has come and the Corporate Transparency Act is set to kick in next year. If you aren’t aware of this new law, it’s time to get in the know because it could impact you, and if it does, you’ll need support. Starting January 1, 2024, every small business will be obligated to submit an annual report revealing the names of their major owners. Now, here's where it gets intriguing. If you happen to have a Trust that holds partial or full ownership in a business, that business might be required to disclose private details about your trust, including details about the name of your Trustee or beneficiaries, in your annual corporate report to the government.

If you’re wondering how to figure out if your Trust needs to be reported or how to address this new law in your business…Keep reading and you’ll uncover the essentials.

What Is the Purpose of The Corporate Transparency Act and What Does It Require?

Enacted in 2020 and set to take effect on January 1, 2024, the Corporate Transparency Act aims to tackle money laundering and terrorism financing schemes involving "shell" corporations—companies that exist merely on paper and don't engage in actual business or trade (like any good mob movie or 90’s wall street flick – that reminds me, it’s been too long since I’ve seen “Boiler Room”).

Under this Act, small companies will now have to disclose the names of any owners who hold an ownership stake of 25% or more in the company, as well as any individuals who exercise significant control over the company's activities. The goal is to expose shell corporations that are frequently involved in money laundering, with the thought being that it tends to occur more often in small businesses, than large corporations.

To comply with the requirements, businesses must submit an annual report to the Financial Crimes Enforcement Network (FinCEN) containing the following details about each owner or controller:

• Business name
• Current business address
• State in which the business was formed and its Entity Identification Number (EIN)
• Owner/controller’s name, birth date, and address
• Photocopy of a government-issued photo ID (such as a driver’s license or passport) of every direct or indirect owner or controller of the company

Failing to file an annual report could result in serious repercussions, from paying a fine of $500 for every day the report is late up to imprisonment for two years.

Does My Trust Need to Be Disclosed?

Since a Trust can own a business or a share of a business, and also can be used to shield the true owners and beneficiaries of businesses - Trusts are also involved in the regulations of Corporate Transparency Act, but under more limited circumstances.

So how do you know if your Trust information will need to be disclosed?

Let’s break it down…

The new rules apply to any company that is created by filing a formation document with the Secretary of State or a similar office, including corporations and limited liability companies (LLCs).

Non-profits, publicly traded companies, and regulated companies like banks and investment advisors are exempt from the rule. Large companies are also exempt if they have 20 or more full-time employees in the US and generate at least $5 million in sales. So, if your trust owns a share of any of these types of companies, it does not need to be reported.

If you have an LLC or corporation, but aren’t actively using it to run a business, that company is exempt from reporting due to its inactivity, so your Trust would not be reported in that instance, either. Yet, if your Trust owns a share of a small, for-profit company, (like a small family business or local real estate investment property) the beneficial owner of the Trust will need to be reported to the Financial Crimes Enforcement Network.

So, if you’re wondering whose information needs to be reported? The beneficial owner is the person (or people) who benefit from the Trust or have the power to make major decisions about the Trust assets. Depending on how your Trust is written, this is usually the trustee, but it can also be the beneficiaries of your Trust.

If you own a business interest inside of your Trust, make sure to contact us (or an experienced attorney in your state if you’re outside of Illinois) to have your Trust reviewed before 2024 to make sure you report the correct beneficial owner(s) of your Trust.

Does the Corporate Transparency Act Affect My Trust’s Privacy Interests or Asset Protection?

One of the best things about creating a Trust is that it provides you and your family with an extra level of privacy and provides asset protection from divorce or lawsuits for your Trust’s beneficiaries after you’re gone.

Thankfully, having a Trust that owns a business or a share of a business doesn’t take away from the Trust’s ability to provide asset protection to your heirs.



And while the new Corporate Transparency Act rules reduce some of the privacy benefits that come along with owning assets inside of a Trust, the names of your Trust, trustees, and beneficiaries are not made public and are only used by the government for the specific purpose of investigating financial crimes. For me personally, as long as the information isn’t made public, for the majority of everyday Americans who are using Trusts so their family can avoid probate, minimize taxes and the headaches of dealing with your death or incapacity – as long as you follow the rules and understand your obligations under the new act – it shouldn’t affect your intended goals for privacy and asset protection. With that being said, even with the new rules surrounding the Corporate Transparency Act, Trusts remain an excellent tool for providing privacy, avoiding probate, and setting up your family with a lifetime of asset protection and financial security.

Guidance for Your Family Now and For Years to Come

If you have a Trust or are curious about creating an estate plan for your family, you may be wondering how changes in the law will affect your plan in the future and how you can possibly plan for them.

As your Personal Family Lawyer®, that’s where I come in. Unlike many estate planning attorneys who serve their clients once and never see them again, I see estate planning as a life-long relationship.

Your life and the world around you are constantly changing, and your estate plan should too.

That’s why I keep my clients informed about any changes in the law that may affect their estate plan and offer to review your plan for free every three years to make sure that your plan still works for you just as well as it did on the day you created it.

If you’re ready to create a custom plan for the ones you love or have questions about how the Corporate Transparency Act might affect you, schedule a free call today.

I can’t wait to serve you now and for years to come.

This article is a service of Family Wealth & Legacy Legal Solutions (FWLLS). We do not just draft documents; we ensure you make educated, informed and empowered decisions for yourself and the people you love. That's why we offer a Family Wealth & Legacy Strategy Session™, during which you will get educated and begin to prepare to avoid life’s most common legal problems and get a plan in place to make the best possible choices for the people you love. You can begin by calling our office today to schedule a Family Wealth & Legacy Strategy Session and mention this article to find out how to get this $750 session at a significantly discounted rate, or even for free.