Let’s take a jaunt back in history, back to those halcyon days of 2024. You were probably arguing about the election, worrying about the fighting in the Middle East, or watching Taylor Swift’s boyfriend win the Super Bowl.
But I, like most estate planners, was dealing with the upcoming BOI reporting. Congress had passed a law requiring most small businesses—even little one-shareholder firms like mine—to file reports with the Financial Crimes Enforcement Network (FinCEN for short) and we were all busy trying to get ready for it. I even filed mine early so I would be able to better advise clients on how to do it.
And then, crickets. The feds kept putting it off and finally cancelled the whole thing. I had spent hours of preparation for a big nothingburger.
So you can imagine the groaning, cursing, and gnashing of teeth when I discovered that they were trying again in 2026, albeit a little differently.
This time it’s called the Residential Real Estate Rule, and it goes into effect March 1 of this year. Instead of all small businesses having to report a bunch of information, now it only applies when residential real estate is transferred to an “entity.”
When I first heard about this, I was told it would apply when people put real estate into a trust. As it turns out, that is not really an accurate description. Yes, it applies to trusts, but there is an exception when the person transferring the property is also a Grantor of the trust. The Grantor – sometimes called the Settlor or Trustor – is whoever created the trust in the first place. So if you create a trust and then transfer real estate into that trust, you don't have to report to FinCEN. And that, friends, is well over 90% of transfers to trusts.
But there is one type of transfer that is decidedly not exempt from the reporting requirement. If I transfer a residential property to a Limited Liability Company (an LLC), that is almost always going to be reportable. So let's say I have a rental property, and I want to put it into an LLC for liability protection. When I transfer the property, I will need to file an electronic report with FinCEN.
Now here's another lovely difference between the old rule that didn't happen, and the new rule: Under the old rule, it would have been the responsibility of the business owner to file the report. My only obligation as the attorney would have been to advise the client to do it. Under this new rule, whoever transfers the property has the responsibility for filing the report. The rule includes what it calls a “cascade” of people who are responsible, but the reality is that as long as I draft the deed, record the deed, or even just confirm for the client that the legal description is correct, I'm going to have this responsibility.
Which raises a question: How do I know all of the information that is supposed to be on this report? Well, of course, I ask the client. What if the client doesn't tell me the truth? Can I be liable? The new rule does give me an out, although not a very easy one. I'm entitled to rely on a written certification from the client.
There is already a lot of stuff I need to do when I create an LLC for a client and then transfer a piece of property to it. I have to file the application with the state corporations division, then do the initial report, then have them sign the operating agreement, then obtain the business license, then get a tax ID number from the IRS, then have them sign the deed to put the property into the LLC, then record that deed. Somewhere in there, I need to coach the client on how to run this LLC so that it protects them in case of liability. And now on top of all that, I have to get this information from them, in writing, and wrestle with an online report.
Or do I? Right now there are bills in Congress to revoke this rule, and several lawsuits arguing that this was beyond the agency’s regulatory authority. Will this happen? Or will it be another nothingburger like the last one?
I'll tell you one thing. I'm not going to waste too much time on this until the deadline arrives. I think I've seen this movie before.
Kenneth Kirk is an Anchorage estate planning attorney. Nothing in this article should be taken as legal advice for a specific situation; for specific advice you should consult a professional who can take all the facts into account. Fool me once, shame on you; fool me twice, shame on me.
