If you have taken the time to create an estate plan, then you understand the importance of ensuring your family’s financial security after you have passed away. You have taken the necessary steps to enable your assets and estate to be passed on with minimum complications and taxes.
However, in recent times, new laws and regulations are changing how individuals prepare for the future.
One law that has caught people’s attention is the Corporate Transparency Act (CTA) and how it may impact their estate plans. Understanding the purpose of the CTA and its implications can help you decide if you need to revise your estate plan.
What is the Corporate Transparency Act?
The Corporate Transparency Act was signed into law in January 2021. The purpose of the act is to enhance the transparency of corporate entities and prevent illicit activities such as money laundering, financing terrorists, tax evasion, and other illegal financial acts.
Starting January 1, 2024, many companies in the United States will need to disclose information to the Financial Crimes Enforcement Network (FinCEN) regarding beneficial ownership, the individuals who actually own or control the company. Both new and existing businesses will need to comply, and the reports will be stored in a secure, non-public database that will only be accessible to authorized government agencies and law enforcement.
How Does the CTA Affect Estate Planning?
The Corporate Transparency Act doesn’t just affect corporations. It is expected to have a significant impact on real estate holdings, asset protection planning, and estate planning. Many people use Limited Liability Companies (LLCs), corporations, and partnerships in estate planning for privacy and asset protection. With the Corporate Transparency Act’s new reporting requirements, these entities will face increased scrutiny, thus affecting the privacy the beneficial owners once had.
Additionally, trusts that have beneficial ownership in a business may need to comply with the Corporate Transparency Act disclosure regulations.
And, while the Corporate Transparency Act itself doesn’t directly affect tax laws, it could have indirect tax implications in relation to estate planning. Specific estate planning strategies are aimed at minimizing tax liabilities, and the new reporting requirements could influence how trusts are used in asset protection.
What Should You Do?
If you have an estate plan that involves an LLC or another entity covered by the Corporate Transparency Act, it’s essential to understand the implications of this new law and how it will impact your existing structures. Our attorneys at Lonich Patton Ehrlich Policastri can assist you. You may need to restructure assets, revise trust agreements, or explore other options for wealth preservation. We have significant experience working with individuals on estate planning and asset protection planning throughout San Jose, Silicon Valley, and the Greater Bay Area.
Contact us for a free consultation by calling (408) 553-0801. We can discuss how we can guide you through the complexities of the CTA while still achieving your estate planning goals.
Disclaimer: This article does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter.