For estate planning purposes it is common for a trust to be an owner of a family company or other business. Under the new Corporate Transparency Act (CTA), companies may be required to disclose confidential private information about the individuals with rights or authority over the trust assets. In other words, if a trust owns an interest in a company, and the trust is a beneficial owner under the CTA rules, the company is required to disclose information about the trustee, as well as individuals with rights or authority over the trust assets. For example:
The reporting company is a limited liability company (LLC), owned by Mr. and Mrs. Smith. The Smith Family Trust (Trust) is a 50% owner of the LLC.
The Trust is a beneficial owner because it owns more than 25% of the LLC. As a result, with respect to the Trust’s ownership in the LLC, the LLC may need to disclose information concerning the following individuals:
- Trustees, or other individuals with the authority to dispose of the Trust’s assets
- A beneficiary who (1) is the sole permissible recipient of the trust income and principal, or (2) has the right to demand a distribution of, or withdraw substantially all of the Trust’s assets
- A settlor who retains the right to revoke the Trust, or withdraw the trust’s assets
- A trust protector (or other individual) with the authority to remove and replace a trustee
- Distribution advisors with the authority to direct the trustee to make distributions
- Investment advisors responsible for investment decisions regarding the Trust’s assets
