A 2023 Massachusetts divorce case reveals how trust assets that many families assume are protected can unexpectedly become part of a marital estate. In Jones v. Jones, a court ruled that a beneficiary’s interest in a family trust was a divisible property right, despite trust provisions designed to limit access to the assets. ACTEC Fellow Daniel Hayward explains why the trust’s drafting made all the difference, how other states approach similar issues, and what estate planning professionals should do to help clients avoid costly surprises. This case offers important lessons for anyone using trusts to support married children or preserve family wealth across generations.
Managing Diminishing Capacity
Planning for diminishing capacity is essential to ensure that personal, financial, and healthcare decisions align with one’s values and wishes as cognitive or physical abilities decline. Without a well-thought-out plan, individuals may face legal complications, financial mismanagement, or medical decisions made by others who may not fully understand their preferences. Establishing powers of attorney, advance healthcare directives, and financial safeguards allows for a smoother transition and reduces stress for both the individual and their loved ones. Proactive planning fosters autonomy, protects assets, and ensures that critical decisions are made with clarity and foresight, rather than in moments of crisis.
ACTEC Fellows Matthew (Matt) R. Hochstetler and Toni Ann Kruse discuss the critical steps needed to plan for incapacity or dementia.
A Primer on the Corporate Transparency Act (CTA) for Business Owners
The CTA mandates that certain businesses disclose detailed information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). The businesses that need to file are corporations, limited liability companies (LLC), and other entities with less than $5 million of assets and 20 employees. This law primarily applies to smaller private entities, with its goal being to identify the individuals who control or own such companies.
ACTEC Fellows explain what business owners need to know about the Corporate Transparency ACT (CTA), including Beneficial Ownership Information (BOI) and filing requirements.
What is the Corporate Transparency Act?
The CTA, which requires certain businesses to disclose information about their beneficial owners to FinCEN, which is the Financial Crimes Enforcement Network, has generated many questions from business owners.
And I’ll start off with asking Raj probably one of the top questions, which is, who is required to report under the CTA?
Raj Malviya: Thanks, Glenn. And just to answer that, it’s important to recognize that the CTA was designed to disclose to FinCEN “beneficial owners” of smaller private entities. The government wants to look under the hood of these entities to see who is in charge, who has ownership, and what types of activities are going on.
What is a CTA Reporting Company and Who Needs to Report?
So, when this law was designed, it created defined terms. And the term we have to focus on is reporting company. A reporting company is required to disclose information about its owners to FinCEN. And the CTA has cast a broad net with a very fine mesh.
So, there are only a few exceptions to the types of entities that are covered under the CTA. But you have to think smaller private entities and the key definition that we start with for a reporting company is it’s an entity formed with the filing of a document, typically articles, bylaws, and organizational documents with the applicable jurisdiction to form the entity. And if you have that, then you’re within the CTA regime. And then it’s peeling another layer off the onion to see if an exception applies to a reporting company.
Glenn, maybe tell us some of the most common exceptions that would apply to a taxpayer or business owner.
Filing Exceptions for the Corporate Transparency Act
Glenn Fox: I mean, typically, if you have more than $5 million of assets and more than 20 employees, you would not have to file. Anybody below those thresholds should check and determine if they need to file. And I would not do that on your own. You should definitely consult a business lawyer or an accountant to determine whether you fall within the exceptions. And if you don’t, to determine who needs to report and what information must be reported.
So, in that regard, Raj, what information must somebody report if they do determine that they are a reporting company?
Raj Malviya: Right. So, you’ve gone through the analysis, hopefully with the help of a professional experience with CTA work and you’ve determined that this entity that was formed is a reporting company because it doesn’t follow within one of the exceptions, 23 of them actually, but only a couple we will see regularly.
Reporting Requirements for CTA Beneficial Owners
Well, again, FinCEN wants to know who is in charge, who is in control, who is an owner in this reporting company. And so, the term of art we have to use is beneficial owner and beneficial owners are people. FinCEN is trying to get to the people behind the entity.
So we look under the hood of this entity, and we’re looking for individuals who have at least a 25% economic ownership stake in the entity, or they have a voting interest, voting control, or there’s this term used in the law that still is subject to interpretation and further guidance, but it’s “substantial control.” Who is exercising substantial control over this entity? And this could be through title, scope of work, job duties, or a typical LLC that’s formed to own investment real estate. We see that case all the time.
The owner, sure, would be the beneficial owner, but also if a manager was appointed to manage the LLC and be in charge of this LLC; the manager has control, enough control to be listed as a beneficial owner. So that’s part of the analysis we do to determine who’s behind the entity.
So, Glenn, you know, we’ve identified our reporting company, we have to identify our individuals in control of the entity or who have ownership. Where does all this information go? What information do we need from the reporting company and the beneficial owners and then where is it put into work product and then submitted to the government?
Filing the Beneficial Ownership Information (BOI)
Glenn Fox: Actually, it’s relatively straightforward for the beneficial owners themselves or the people who have substantial control who also are considered beneficial owners. You would report:
their legal name,
their date of birth,
their residential address,
their identifying document would have to be filed on the FinCEN website with this information like a passport, copy of a passport, copy of a driver’s license, and the ID number from that document.
If your beneficial owners are a bit skittish about having that information given to a reporting company, they themselves can go onto the FinCEN website and obtain what’s called a FinCEN Identification Number and just give that number to the various companies of which they are beneficial owners. This way, they control the input of the information. And all of this is reported, the beneficial owner information by the reporting company or the individual owners getting their FinCEN ID on the FinCEN website. It’s all done electronically. There are no paper reports. And it’s a relatively straightforward website. You could Google FinCEN beneficial owner information and the website will immediately come up: fincen.gov/boi.
I guess, Raj, once we know that we have this obligation report, what penalties will we face if we fail to comply?
Deadlines for Filing Beneficial Ownership Information (BOI)
Raj Malviya: Yeah, thank you. Let me cover that kind of in a two-phase answer. I think the first is we got to know what our deadlines are, right? And our deadlines to report are going to be, there’s two different, two sets of deadlines.
One deadline to report this information to FinCEN is going to apply to existing companies, companies that existed before January 1, 2024. And for those entities, there’s essentially a one-year filing deadline. So, the end of this year, where this is being recorded September 12, 2024, so at the end of this year, 2024, is when the initial phase of reports for all these existing entities is due.
The second deadline applies to entities created on or after January 1, 2024. So again, this year, in real-time, 2024, and for those entities, the filing deadline is 90 days from the creation of the entity. And that 90 days is going to change and get scaled back to 30 days, 30 calendar days after 2024.
So, we figured out the reporting company, who the owners are, the information, we gathered the information needed to complete the report electronically. We know what our filing deadlines are, but what happens if you don’t file?
Penalties for Not Filing Beneficial Ownership Information (BOI)
Well, if you don’t file based on a willful disposition because you knew about it but didn’t want to, or you didn’t think you should, or maybe you just arguably ignored the law and thought you would fly under the radar. Those are examples of what I think are willful failure to file. And if you have a willful failure to file, the penalties are steep.
It’s a $500 per-day civil penalty for each day that the reporting doesn’t happen. And there’s no maximum amount on that.
And then there’s a criminal penalty, and there’s a monetary part to that. It’s a $10,000 maximum criminal penalty with potential jail time.
Very similar to what we see with FBAR reports for reporting foreign bank accounts. So that said, if a filing is done in good faith and the information is gathered that you believe is correct, and you have the advice of even an advisor helping, and there’s information later discovered that should be included in the report, well, that’s different. That’s not willful. That’s more of a reasonable type of discovery. And there are rules that allow for reports to be updated so that the violation is not willful.
Glenn, we’ve covered a lot here, but I think we need to briefly touch on the information itself. Where does it go? How is it stored, and is it protected?
Protection of Beneficial Ownership and the CTA Information
Glenn Fox: We said, all information is on the FinCEN website. It is not accessible by the general public. Only law enforcement can get the information, and they would have to make a request of FinCEN. FinCEN can deny the request in many circumstances. Other cases you would have to go to court as a law enforcement official to get the information. So, it is relatively protected once it is on the website.
The New Normal for Charitable Tax Planning
The new normal for charitable tax planning has shifted due to recent changes in tax laws and regulations. It's important to stay informed and adapt to these changes in order to maximize the benefits of charitable giving while optimizing tax efficiency.
This podcast explores crucial aspects of charitable tax planning: contemporaneous written acknowledgments, qualified appraisals, and anticipatory assignment of income.
Funding Your Revocable Trust and Other Critical Steps
It's important to ensure that your revocable trust is properly funded. This involves transferring assets such as real estate, bank accounts, and investments into the trust's name. Additionally, updating beneficiary designations on retirement accounts and life insurance policies is crucial to align with your trust. Reviewing and updating your estate plan regularly is also important to ensure it reflects your current wishes and circumstances.
Experts in estate planning explain why funding your trust is vital for seamless asset transfer, minimizing legal issues and taxes, and safeguarding your beneficiaries' future in this video.
Social Security Retirement Age and Benefits | When to Apply for Social Security
When it comes to Social Security retirement benefits, the age at which you can begin receiving benefits and the amount you receive can vary based on when you choose to start receiving benefits. It's important to understand the implications of when you choose to start receiving benefits, as it can impact the amount you receive each month.
What are the advantages and disadvantages of taking Social Security retirement benefits early, at age 62? Should you delay taking Social Security retirement benefits to age 70? How does taking retirement benefits impact your spouse, dependents and disabled dependents? ACTEC Fellows explain what Americans need to consider in determining when to take their Social Security retirement benefits.
Understanding Cryptocurrency in Estate Planning
Cryptocurrency is an increasingly important consideration in estate planning. Unlike traditional assets, such as real estate or stocks, cryptocurrency is decentralized and can be easily overlooked or inaccessible if not properly addressed in an estate plan. It's crucial to include specific instructions for accessing and transferring cryptocurrency assets in your will, trust, or other estate planning documents. Additionally, it's important to keep an updated inventory of your cryptocurrency holdings and store the relevant access information (such as private keys or passwords) in a secure but accessible location. Consulting with a knowledgeable estate planning attorney or financial advisor can help ensure that your cryptocurrency assets are appropriately accounted for in your estate plan.
Understand how to manage cryptocurrency in your estate and plan for the succession of your digital assets from estate planning experts.
How to Pay for College for a Grandchild or Someone Else
What do grandparents or benefactors need to know about paying for a family member’s college tuition? Tax experts offer recommendations to grandparents and loved ones on how to contribute to a student’s education without jeopardizing grants and paying taxes. The American College of Trust and Estate Counsel, ACTEC, is a national association of approximately 2,400 peer-elected lawyers and law professors from across the United States and abroad with expertise in estate planning, probate and trust administration.
Inheritance and Estate Settlement
After the death of a loved one, survivors want to know, when will I receive my inheritance? What happens to a person’s assets after they pass away? What if a person dies without a Will?
ACTEC Fellows answer these questions, explain how inheritance and estate settlement work, and what to keep in mind when you have been identified as a beneficiary in a will or trust.
Divorce and Estate Planning
Going through a divorce can be emotionally and financially stressful. Knowledge is power. Understand what estate planning documents are impacted by a divorce from ACTEC Fellows.
5 Reasons to Update Your Estate Plan
The most frequent estate planning error is not having a plan! The second is not updating an existing plan as major life events happen such as:
1. New Child or Grandchild,
2. New Marriage or Divorce,
3. Retirement,
4. Moving to another state, and
5. A considerable change to your financial net worth.
Learn when to update a Will or Trust, such as after a move or divorce, when your children grow up, or if you have a business. ACTEC Fellows, experts in trusts and estates, discuss 5 reasons why you may want to update your Will and Estate Plan.
Estate Planning Strategies for Retiring Abroad
Interested in retiring abroad? We are too!
Learn what estate planning information to keep in mind when moving overseas, such as if your will or trust will be valid in another country, guardianship considerations when moving with minor children, and special tax considerations and laws.
ACTEC Fellows offer an overview of international moves. If you are thinking of making a more permanent trip across the pond, contact Schooley Law Firm to assist you with your estate planning needs.
Living Trusts and the Impact on Taxes
Living trusts are a popular estate planning tool that can have a significant impact on taxes depending on factors like the type of trust, the assets involved, and the tax laws of the state or jurisdiction in which you reside. When properly structured, a living trust can help minimize estate taxes and provide tax benefits for both the trust creator and beneficiaries. Living trusts offer the flexibility of altering or revoking the trust during the grantor’s lifetime, whereas irrevocable living trusts cannot be changed or revoked once established.
It's important to note that the tax implications of a living trust can vary depending on individual circumstances and applicable tax laws. Therefore, it's crucial to consult with a qualified estate planning attorney (like the ones at Schooley Law Firm, PC) or tax advisor to ensure that a living trust is structured in a way that maximizes tax benefits and complies with relevant regulations.
ACTEC Fellows discuss the tax implications of setting up and funding a living trust and what individuals need to understand when consulting with a tax advisor in this week’s podcast.
When considering a living trust as part of an estate plan, it's essential to seek professional guidance to fully understand the tax implications and ensure the trust is structured to achieve the desired tax benefits.
Postmortem Planning
Postmortem estate planning is the decisions and elections that an executor makes after someone dies when the executor implements the estate plan. However, some of the best postmortem planning occurs before death.
ACTEC Fellows give a concise summary of estate tax planning, disclaiming, decanting, portability options and the impact of pre-mortem decisions on postmortem planning.
How Does a Revocable Trust Avoid Probate?
Probate is the general administration of a deceased person's will or the estate of a deceased person without a will. During probate, the administrator/executor has the responsibility of managing the decedent’s estate by receiving all probate assets of the estate, determining and paying all lawful debts of the estate, making distribution to the proper beneficiaries under the will, or in the case of intestacy, to the intestate heirs at law according to the laws in effect in Virginia, and to report to the Commissioner of Accounts on the actions taken during administration.
A revocable trust is a trust whereby provisions can be altered or canceled depending on the wishes of the grantor or the originator of the trust. During the life of the trust, income earned is distributed to the grantor, and only after death does property transfer to the beneficiaries of the trust.
ACTEC Fellows discuss in easy-to-understand terms the purpose and role of a revocable trust in avoiding probate, what a revocable trust can and cannot do, if a revocable trust can protect assets from creditors, and steps individuals need to take when setting up a revocable trust.
Managing Guns in Your Estate
There are many considerations when managing guns and firearms in your estate and leaving them to beneficiaries. Depending on the weapon, federal and state laws are in play. What must you understand to transfer a family firearm in your will?
Estate planning experts explain the complexity of leaving firearms and guns in your will and offer tips regarding what to consider when bequeathing weapons.
The Dissatisfied Heir - Inheritance Dispute
As heirs, it is important to understand your rights when it comes to inheritance disputes. In some cases, disputes can arise when there are questions regarding the validity of the will or the distribution of assets. It is important to know that you have the right to contest a will if you believe that it is not valid or that its contents do not accurately reflect the wishes of the deceased. However, it is important to note that contesting a will can be a complex and costly process, and it may not always be in your best interest to do so.
Before making any decisions, it is important to seek legal counsel to understand your options and to determine the best course of action for your specific circumstances. In addition to understanding your rights and options, it is also important to be aware of any time limitations that may apply to your case. For example, there may be a limited window of time in which you can contest a will, so it is important to act quickly if you believe that there may be an issue.
Ultimately, the most important thing is to approach inheritance disputes with care and consideration. By working with experienced legal professionals like the ones at Schooley Law Firm, and taking the time to understand your options, you can help to ensure that your rights are protected and that any disputes are resolved fairly and efficiently.
529 Plan Pros and Cons
Learn what you need to know about 529 Plans and saving for educational purposes including:
What to keep in mind when choosing a plan,
2. How to pick a successor account owner,
3. How to use the distributions,
4. How to manage the expenses, and
5. What to do if you have leftover money.
ACTEC Fellows answer the questions parents and families have about how 529 Plans work and what you need to keep in mind when saving for higher education.
Artificial Intelligence (AI) and Planning Your Estate
Artificial Intelligence (AI) can play a crucial role in tasks such as wealth forecasting, tax optimization, and personalized financial advice. These technology tools can help streamline the estate planning process by automating routine tasks, ensuring compliance with legal requirements, and providing real-time updates on changes in financial landscapes—but there are risks.
ACTEC Fellows explain what consumers need to understand and list questions to ask their estate planning attorney, who may be using this new technology.
Tips for Managing Digital Assets of a Deceased or Disabled Person
Today, many accounts and correspondence are accessed by email, not “snail mail.” What happens to social media and email accounts if someone becomes disabled or passes away? Identifying legacy account holders for digital assets as part of an estate plan will speed up the administration and reduce the stress on the estate’s executor and loved ones. So, how do you plan for the postmortem management of digital assets?
Estate planning experts offer tips for adding legacy contacts to email and social accounts and recommendations for executors working to access digital property when a legacy contact has not been set up.