The implementation of the Corporate Transparency Act (CTA) and the New York LLC Transparency Act (NYLTA) introduces new reporting obligations that have significant implications for trusts and estates that hold ownership interests in corporations, limited liability companies (LLCs), or limited partnerships. Failure to comply with these reporting requirements can result in substantial penalties, including fines of $500 per day and potential criminal prosecution (under the CTA).

Trusts and estate plans created prior to the enactment of the CTA may not address the need for trustees and beneficiaries to provide sensitive personal information to the management of entities in which they hold an interest. As such, estate administration checklists must be updated to include CTA reporting obligations, and newly drafted trust and estate plans should consider these requirements when drafting and selecting individuals for fiduciary roles.

The Corporate Transparency Act

The CTA, enacted on Jan. 1, 2021, as part of the Anti-Money Laundering Act of 2020 (AML Act), aims to enhance transparency in the financial system and combat illicit activities, such as money laundering and terrorism financing. The act requires entities operating in the United States—such as corporations, LLCs, and other similar entities—to report beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN) (See https://www.fincen.gov/boi). This represents a significant shift from the previous U.S. practice, where the creation of entities could be done almost anonymously.