New Real Estate Reporting
Starting March 1, 2026, many common residential real estate transfers will trigger new federal reporting requirements (the “Rule”) from the Financial Crimes Enforcement Network (FinCEN).
The stated purpose of these rules is to reduce the ability to use real estate to obfuscate ownership, or move funds in a way that the government cannot identify. The rationale for the reporting requirements is that there are estimates that a large percentage of federal money laundering cases involve real estate. FinCEN is seeking information to elucidate opaque ownership structures that can obscure the natural persons behind real estate ownership, regardless of formal legal labels.
Understanding how these rules may affect your estate and trust planning, and other transactions, should help you avoid violations, and enable you to make more informed decisions. Failing to file can subject you to costly monetary penalties and imprisonment.
What Real Estate May be Subject to Reporting?
These new federal rules will require additional reporting when residential property is transferred to a legal entity or a trust. Residential property is broadly defined to include single-family houses, 1-4 family houses, condominiums, and cooperatives. Even some mixed-use properties that include residential property may be subject to the reporting rules. It appears that land on which the transferee intends to build a structure designed principally for occupancy by one to four families is included. How can you determine what the trustee of a trust or manager of an LLC may “intend” to do?
Exclusions
These requirements only apply to transactions that are not subject to traditional institutional financing (e.g., a commercial mortgage). Loans, even loans secured by mortgages, that are provided by family members (e.g. a parent), family trusts or even family entities, will not trigger the exception so that reporting is required. The rationale for this is that commercial lenders, like banks that make home mortgages, are subject to significant reporting obligations without this new law.
Real estate transferred as a result of death, whether by will or trust, will not trigger the reporting requirements.
Will These Reporting Requirements Remain In Force?
There are already challenges to the new law. The reporting requirements are not intuitive, complex, incredibly detailed and suffer from some of the same issues that the Corporate Transparency Act (“CTA”) created and that was severely curtailed. Will these new real estate reporting rules suffer a similar cut-back? The problem, which is similar to what happened with the CTA, do advisers invest the time to learn the new rules now? Do you report a transaction which appears to require reporting? If you wait you may face penalties. What do you do? The downside of reporting is the cost of reporting and that you are putting information that you might view as private into another governmental database.
Which Transactions Are Affected
Reporting is triggered when you transfer non‑commercially-financed residential real estate to a legal entity, like a limited liability company (“LLC”), or to a trust. If you acquire or transfer property directly as an individual, these rules generally do not apply.
Who Is Responsible for Reporting
The person required to report is designated as the “reporting person,” determined by their involvement in the real estate transaction. If there is a closing or settlement agent listed on the real estate closing statement that would be the person obligated to report. For example, if you hire an attorney to handle the closing of the real estate transfer that attorney may be deemed the reporting person unless there is perhaps a title company involved who is instead indicated. The person preparing the settlement statement for the transfer, filing the deed, underwriting title insurance, or disbursing funds, could each be considered responsible for the filing. The parties to the real estate transfer may also agree in writing to designate one of the professionals involved to handle the reporting. So, for example, if a trust is the recipient transferee of the real estate, the trustee may request that the trust’s attorney be designated.
This could be problematic in many family or estate planning real estate transfers since these are often handled more informally than real estate sales between unrelated parties. If the family itself is handling the transaction that will not avoid the filing requirements if they are triggered. If a family office or estate planner is handling the transaction, be sure they are aware of the reporting requirements and address them.
When Must Reports be Filed?
Reports must be filed by the later of 30 days after closing, or the last day of the month following the month in which closing occurred. So, there is a 30–60-day period depending on when the closing occurred. 31 C.F.R. § 1031.320(k)(3).
When is this date? The trigger date seems to be when the transferee entity or trust receives an ownership interest, i.e., when ownership legally vests. That may vary depending on state property law. That might require consideration of different factors:
- When the grantor signed the deed.
- When the grantor delivers the deed to the trustee (or in the context of an LLC or entity, would that mean to the manager or members?) with intent to presently convey ownership. How can anyone know what you intend as to the transfer?
- When the transferee accepts the deed.
- Recording the deed in the local real estate recording office may not be required to vest ownership.
- But just signing the deed may not vest ownership if the grantor does not intend to consummate the transfer or retains control. What if you sign the deed to your house transferring it to your trust but you continue to live there? That is common in many residential transfers of property, but what might it mean in this context?
It may even be more complicated in an estate planning context. What if you transfer the ownership interest in your residence to a trust, but not in excess of the portion that equates to some specified dollar value and the excess ownership interest spills into another trust? The mechanism to cap the value of the transfer may be pegged to the gift tax value as finally determined by audit or by the lapse of the gift tax return statute of limitations. That may not happen for years. Does the contingent transferee trust have an ownership interest? When? What do you report?
What Information Is Reported
For a reportable transaction a Real Estate Report must be filed. This will have to include specifics about the transaction itself and about the parties involved (the transferor and the transferee, e.g. you and a trust or entity). Identifying information for the reporting persons must be provided. Be certain that if a trust or entity is involved the correct legal name is used. The property transferred must be described. Other details on the entity or trust may also be required. If the transferee is an entity, information about its beneficial owners must be provided. Beneficial Owner Information (BOI) to report includes full legal name, date of birth, complete current residential street address, citizenship, Social Security Number or Taxpayer Identification Number. BOIs include individuals who own or control a significant portion of the entity or who exercise substantial control over the entity. For a trust information about the trustees, the settlor who created the trust if he or she holds rights to revoke the trust (e.g. a revocable or living trust). Even beneficiaries that have significant access to trust assets may have to report.
Transfers to Individuals
If property is transferred directly to individuals (e.g., adult children instead of a trust for them), then reporting will not be required. But many estate planning transactions seek to protect the transferee from claims or divorce impacting the property, or the imposition of estate or other taxes. That is why trusts are often favored over outright transfers. But using the trusts may trigger reporting.
Estate Planning and Trust Transfers
It is very common in estate planning transfers to retitle a residential property to a trust. For example, one of the most common trusts used in estate planning is a revocable trust designed to provide for management during disability, or to avoid probate on death. Fortunately, these common types of estate planning transfers appear not to trigger reporting requirements. This presumes, however, that there is no payment made to you (i.e., no consideration).
Transfers to irrevocable trusts (trusts that in very general terms cannot be changed) are commonly used in estate planning to remove assets from your estate to avoid estate taxation on death, and also to protect those assets from creditors or other claimants. “A reportable transfer does not include a transfer for no consideration made by an individual, either alone or with the individual’s spouse, to a trust of which that individual, that individual’s spouse, or both of them, are the settlor(s) or grantor(s).” 31 C.F.R. § 1031.320(b)(2)(vi). If the residential real estate is transferred by gift to a trust created by you or your spouse there should be no “consideration” and no reporting required. However, in some instances the trust might take the residence subject to the mortgage or other debt (i.e., the trust becomes obligated to repay the debt), that may be viewed as consideration and thereby trigger reporting. In other cases, a very valuable residence may be sold to the transferee trust and in such instances that might trigger a reporting obligation.
One type of irrevocable trust, called a Beneficiary Defective Irrevocable Trust (BDIT) is typically created in the following manner. Parent is the settlor of the trust. Parent contributes $5,000 to the trust and the child as beneficiary has a power to withdraw that amount making the trust a grantor trust for income tax purposes as to the child. A transfer of real estate to this trust by the child may not have income tax consequences but reporting the transfer would be required since the transferor/child may not be deemed the settlor of the trust. The use of the term “grantor” in the law appears to mean the settlor or trustor who creates the trust not the person deemed the owner of the trust for income tax purposes. The terms “settlor” and “grantor” are used together in the law, joined by “or.”
Another trust to consider are Qualified Personal Residence Trusts (QPRTs) which are created to remove your home from your estate at a discount. During the initial term of the QPRT, the transferor retains the right to reside in the house, and if you die during that initial term, it is included in your estate. The new reporting should not be triggered when the initial deed transfer to the trust is completed. Reporting also should not be triggered after the end of the initial term of the QPRT. In both cases the transfer is to a trust that you as the transferor created (you are the settlor). That is exempt from reporting. On the termination of the initial QPRT term the interest in the home is often transferred to a successor grantor trust that is formed under the QPRT trust document. That too would seem not to require a filing since that too is a trust for which you are the settlor (creator). If the house instead passes outright to adult children, which is not uncommon, then filing still should not be required because transfers to individuals do not trigger reporting under the new Rule. While no reporting is required this illustrates the steps and complexity that might be involved in making that determination.
There is no reference anywhere in the rule to income tax ownership, Subpart E, or “grantor trust” status.
The Rule also includes a legal arrangement that is similar to a trust that will be treated as a trust for reporting purposes. Thus, an arrangement that may not meet the definition of a “trust” under state law may still be subject to the Rule. This arrangement could include a person who places assets into an arrangement, the assets are subject to fiduciary‑type control, the assets are held for the benefit of others or for a defined purpose, control over the assets is separated from beneficial enjoyment. Might this include certain types of nominee arrangements.
Statutory trusts are treated as transferee entities so that reporting may be required.
Who must report on behalf of a trust that is required to report? The trustee is included. But reporting is not limited to merely a trustee. Any person who has the authority to dispose of the real estate, such as a trust protector or trust advisors with disposition authority, may have to report.
Entity Transfers
It is very common in estate planning transfers to retitle a residential property to an LLC (or other entity, but LLCs are the most common). It is very common in estate planning to first transfer a residence to an LLC and then transfer part or all of the LLC interests (i.e., the LLC that owns the residence) to a trust. This may be used to avoid subjecting the trust to the laws or tax rules of the state where the property is located, if the trust is located in another jurisdiction. For example, a New York resident may transfer a house located in New York to a trust that was formed in South Dakota to take advantage of the more favorable tax and trust laws there. If that is done the South Dakota trust could be subjected to New York law by owning New York real estate. To avoid that, the New York real estate would be first transferred to an LLC. In that way, the South Dakota trust would only then own an intangible asset in New York, the LLC, and not real property in New York. Transferring real estate to an LLC may also provide further asset protection benefits then merely using a trust without an underling entity. For example, husband and wife create irrevocable trusts for each other (called non-reciprocal spousal lifetime access trusts). A residence may be transferred to an LLC and then one-half of the LLC gifted to each trust. That might enhance asset protection since neither trust has control over the LLC. It may also support valuation discounts on those gifts. But entity transfers may trigger reporting requirements. It doesn’t appear to matter that there was no consideration to you and your spouse from the LLC. The only no‑consideration exception relevant to estate planning is expressly limited to trusts, not entities. So, the transfers of residences to LLCs, which is a common step in so many estate plans, will require reporting.
In many of the above situations not using an LLC is not a practical option.
Involuntary Transfers May Avoid Filing
On your death a house you owned in your own name will pass under your will. If you had transferred the residence to your revocable trust while alive that trust will control the distribution or transfer of the residence following your death. Either your will or revocable trust may provide that the residence passes in trust to benefit designated people (e.g., a surviving spouse, children or others). If you divorce the court may order a property settlement agreement that requires the transfer of a residence. These transfers do not appear to require reporting under the new rules.
How This May Affect Your Planning
If you hold or plan to acquire residential real estate through entities or trusts, these rules may influence how you structure transactions. For example, transferring property you already own into your own trust without consideration should remain outside the reporting regime. By contrast, transferring property to an entity you own, or purchasing property through that entity without financing, may trigger reporting.
Might you opt to have a trust instead of an entity be the transferee for the residence involved in the planning?
Conclusion
These new reporting rules reflect a broader shift toward transparency in real estate transactions involving entities and trusts. They introduce additional complexities, recordkeeping, disclosure requirements, and more. While many common estate planning transfers remain unaffected, others may trigger reporting. Before any transfer of residential real estate (or even mixed-use property that includes residential real estate) it would seem prudent to inquire of counsel as to whether the reporting requirements might be triggered and if so how to handle them or revise the structure.
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