The Corporate Transparency Act and Trusts: What You Need to Know as a Trustee

Until recently, trusts and closely held entities could operate with a high degree of privacy. That changed with the Corporate Transparency Act (CTA), a federal law enacted in 2021 to combat money laundering and financial crimes. The CTA requires many domestic and foreign companies to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). These beneficial ownership reports will create a national database accessible to law enforcement and, in limited cases, financial institutions. As the deadlines for compliance approach, trustees and estate planners need to understand when and how trusts are involved.

The CTA does not transform trusts into reporting companies, but when trusts own or control entities subject to the law—such as limited liability companies (LLCs) or corporations—the people behind those trusts may have to be disclosed. This article outlines the CTA’s requirements, defines beneficial owners in the context of trusts, and offers practical steps for trustees and estate administrators.

Reporting Companies and Beneficial Owners

Under the CTA, a Reporting Company is any corporation, LLC or other entity created or registered to do business in the United States, unless it falls under one of several exemptions. These exemptions include publicly traded companies, large operating companies (with more than 20 full-time employees and $5 million in revenue) and certain regulated entities. Reporting Companies must file Beneficial Ownership Information (BOI) reports with FinCEN that identify individuals who directly or indirectly either:

1. Exercise substantial control over the company, or

2. Own or control at least 25 percent of its ownership interests.

There is no maximum number of beneficial owners; a company must report all individuals who meet these criteria.

Do Trusts File Reports?

Most trusts are not themselves Reporting Companies. The CTA applies to entities registered with a state Secretary of State or equivalent office. Trusts generally are not created through state filings and therefore are excluded. However, if a trust owns or controls at least 25% of a Reporting Company, the CTA looks through the trust to identify the individuals who should be reported. In effect, the law treats certain trustees, beneficiaries and grantors as beneficial owners of the entity.

Which Individuals Are Reported?

Who is considered a beneficial owner when a trust owns a Reporting Company?

• Trustee or person with authority to dispose of trust assets: If a trustee can sell, pledge or otherwise dispose of the entity interest held by the trust, that trustee is treated as a beneficial owner of the entity.

• Beneficiary with an unconditional right to income or principal: A beneficiary who is the sole permissible recipient of the trust’s income and principal, or who can demand a distribution of the trust’s assets, must be reported.

• Grantor with power to revoke or withdraw assets: If the settlor can revoke the trust or swap assets in and out (as with some grantor trusts), the grantor may be deemed a beneficial owner.

If the trust uses a corporate trustee, it may be necessary to identify whether individuals who own 25% or more of the corporate trustee indirectly own or control 25% of the Reporting Company. Additionally, trust protectors, distribution advisors or other decision makers may also be considered beneficial owners and reported.

For estates, beneficial ownership reporting is triggered once the estate is settled and a beneficiary receives an ownership interest in the Reporting Company significant enough to reach the 25% threshold. A personal representative must monitor these changes and notify Reporting Companies accordingly.

Notably, minors are not treated as beneficial owners; instead, the child’s parent or legal guardian is reported until the minor reaches the age of majority. Agents acting under a power of attorney are also not considered beneficial owners.

Reporting Deadlines

The CTA imposes strict deadlines:

• Existing companies: Entities created or registered before January 1, 2024, must file their BOI reports by January 1, 2025.

• New companies formed in 2024: They must file within 90 calendar days after receiving notice that their creation or registration is effective.

• New companies formed on or after January 1, 2025: They must file within 30 calendar days after their formation.

Once filed, reports must be updated within 30 days of any change in the reported information, such as a new beneficial owner, a change in address or the death of an owner. Penalties for failing to report or providing false information include civil and criminal fines, making it critical to meet these deadlines.

Practical Steps for Trustees

1. Identify entities: Trustees should inventory all LLCs, corporations or other entities owned by the trust or in which the trust holds a 25% or greater interest. Determine whether each entity qualifies as a Reporting Company.

2. Determine beneficial owners: For each Reporting Company owned by the trust, identify the trustee(s), beneficiaries or grantors who meet the CTA’s criteria. Keep in mind that corporate trustees may require disclosure of their own owners.

3. Gather information: The BOI report requires each beneficial owner’s full legal name, birthdate, address and unique identifying number (such as a driver’s license or passport number). If a beneficial owner obtains a FinCEN identifier, they can provide that in lieu of personal information.

4. File on time: Entities formed before 2024 must file by January 1 2025; new entities have 90 or 30 days depending on formation date. Trustees should coordinate with company counsel or formation agents to ensure timely filings.

5. Monitor changes: Update filings within 30 days if there are changes in beneficial owners or relevant information. Changes include transfers of entity interests, replacement of trustees, or a beneficiary reaching the age of majority.

6. Maintain records: Maintain documentation supporting the identification of beneficial owners, including trust agreements, company records and notes on determinations. These records may be essential if the trust is audited or if there is a dispute about reporting obligations.

Potential Impacts on Estate Planning

The CTA adds complexity to estate planning structures. Many families use LLCs or partnerships to hold investment properties or family businesses. These entities, when owned by trusts, may now trigger additional reporting obligations. For example, a family limited partnership used to manage a vacation property may require a BOI filing if the partnership is a Reporting Company and the trust owns at least 25%. Trustees must then determine whether they, beneficiaries or grantors meet the beneficial owner thresholds.

The law also encourages transparency. Families who value privacy may need to revisit entity structures or consider whether trust-owned businesses remain the best vehicle. While the BOI registry is not public, law enforcement agencies will have access, and financial institutions may require proof of filing when opening or maintaining accounts. In some cases, using larger operating companies or exempted entities might be a way to avoid filing.

Conclusion: A Call to Action for Trustees

The Corporate Transparency Act represents a major shift toward disclosure of beneficial ownership, and trusts are not completely immune. Trustees who oversee entities owned by trusts must understand when and how to report, identify who counts as a beneficial owner, and meet the strict filing deadlines. Failure to comply can result in penalties and disrupt trust administration. By taking a proactive approach—reviewing entity ownership, documenting beneficial owners and establishing compliance protocols—trustees can navigate the CTA effectively and avoid unpleasant surprises as the compliance dates draw near.