Estates, Trusts, and The Corporate Transparency Act
Knowledge is Power
Growing up, my parents were serious about education and making sure we knew how important it was to not just excel in school but to truly engage with the educational experience. There’s more information available than ever before, but that doesn’t mean folks are engaging with the information and thinking about how it will impact their lives.
With the Estate Planning and Probate Summer Series, my goal is to provide information through real life examples and basic overviews that cover all aspects of estate planning and probate. This series is about giving people straightforward information steeped in experience and expertise. Knowledge is powerful and having an understanding of complex issues like estate planning goes a long way in encouraging empowerment, clarity, and focus when making important decisions about your life and the lives of those you love.
Tales from Probate…
A father died, leaving two sons as heirs. Unfortunately, there was no will or estate plan in place. The deceased father’s only asset was a house that the father used as a rental property. The brothers intend to sell the house and when moving forward, they discover that the house was originally owned by their grandfather and was never probated or deed transferred to the father.
If the house had been properly transferred as part of an estate plan, the brothers would have received a step up in basis for the house and would not have any taxes to pay when they sold the property.
Because the house was not probated when the grandfather died, the brothers owe capital gains taxes on the increased value of the house from the time the grandfather died all the way to the time the father died.
Estates, Trusts, and The CTA
Beginning this year, the Financial Crimes Enforcement Network of the United States Department of the Treasury (FinCEN) set forth a rule that all beneficial entities of a business report specific information about themselves and their business. Congress passed an act to enforce that rule called The Corporate Transparency Act or CTA. We wrote about it earlier this year, “New Year, New Rules,” and reminded everyone to revisit their business filings to ensure compliance.
The CTA is part of an international effort to fight financial crimes, such as money laundering and tax evasion, and applies primarily to small businesses, which are not subject to a lot of oversight. There has been some talk about the legal challenges to the CTA, but FinCEN has made it clear that they are committed to enforcing the CTA as it is written.
Some people aren’t sure if the CTA impacts them, and even more people are curious about how the CTA affects their estates and trust. To put it plainly, if you own (directly or indirectly) 25% or more stake in a reporting company, such as an LLC, the CTA impacts you, and if you created an LLC or hold ownership interests in a company as part of your estate plan or trust portfolio, then it affects you even more!
For example, if your estate includes a trust that has beneficial ownership in an organization that must report because of the CTA, then information about the trustee, the beneficiary, and the settlor of the trust must all be included in the CTA reporting. There is also a process for executors of an estate that includes CTA-beholden companies and reporting requirements for decedents who were beneficial owners of CTA-beholden companies prior to their death.
It can be a lot to navigate among the other requirements and processes involved with executing estate plans and making sure estate plans are in compliance with CTA in general. Rather than taking your best guess as to whether or not your business and estate plan are aligned with the new rule, be proactive and work with an experienced attorney who can guide you through the process.
Source: https://www.pullcom.com/newsroom-publications-Corporate-Transparency-Act-Application-to-Estates-and-Trusts