Ultra-high net worth individuals are constantly seeking privacy within their estate planning. Prior to Jan. 1, 2024, they could preserve their anonymity by creating various domestic and foreign legal entities. Individuals would choose a name unrelated to their own for their entity, and the members of such an entity would remain anonymous. However, these practices have changed with the introduction of a new federal law called the Corporate Transparency Act (the Act). 31 U.S.C. Section 5336, 31 C.F.R. Section 1010.380.

Developed with the aim of preventing money laundering, the Act creates a database of information concerning individuals who own or control a substantial interest (Beneficial Owners) in certain types of domestic and foreign legal entities (Reporting Company or Reporting Companies). The Financial Crimes Enforcement Network (FinCEN) is in charge of creating and maintaining the database of the information the government collects pursuant to the Act. While not explicitly a tax or estate planning law, this anti-money laundering law still has a direct impact on individuals who own an interest in corporations, LLCs, limited partnerships, or similar entities, as well as individuals who serve in a fiduciary capacity of such entities. Many of the entities created as part of an individual’s estate plan are subject to the Act, although certain entities are exempt from the Act. Reporting Companies created prior to Jan. 1, 2024 will have until Jan. 1, 2025 to comply, Reporting Companies created prior to Jan. 1, 2025 will have 90 days after they are created to comply, and Reporting Companies created after Jan. 1, 2025 will have 30 days after they are created to comply.