Tuesday, July 8, 2025

Big changes are coming to non-financed real estate transactions. It will impact more than just title & settlement agents or real estate attorneys. Estate planning attorneys, trust departments, wealth management advisors and financial planners all need to know the new rules of the game.

We’ve brought in guest blogger, Ruth Dillingham, Esq. & NTP to share the 411 with you in today’s blog.

She’ll also be featured on the Keys to Real Estate podcast episode on Thursday, July 10.

It’s never too soon to start planning for this massive new FinCEN requirement that becomes effective December 1, 2025.

Let’s get ready!  And now, here’s Ruth…

Thanks, Mary!

Someday people involved in residential real estate closings may think nothing of collecting and delivering large amounts of private, personal, financial information to settlement agents or escrow officers for delivery to the federal government. When, and if they do, they will agree on the date that it all began: December 1, 2025.

That is the date selected by the US Treasury to implement, through the Financial Crimes Enforcement Network (FinCEN), a regulation within the Bank Secrecy Act which requires the reporting of information to FinCEN about any transfer of residential real estate which is both ‘non-financed’ and involves any transferee that is a legal entity or trust.
(the “Residential Real Estate Rule” issued on August 29, 2024).

What is the impact on estate planning attorneys?

Estate planning attorneys have long advocated for clients to transfer real estate, particularly residential property with family sentimental value, into an entity prior to death, rather than to bequeath it by inheritance. Done correctly, this can pass the property to loved ones while reducing tax consequences, avoiding probate, and providing creditor protections. Due to its greater flexibility for ownership interests and provisions for management responsibilities, limited liability companies (LLCs) have become more commonly used entities than traditional trusts. Estate planning attorneys are skilled at drafting both based on client needs. With the intentionally broad scope of new Rule, a transfer into either one will trigger FinCEN reporting unless it meets the criteria of a narrow carve out.

What is the Rule’s effect on creating an estate plan?

If, as part of the estate plan, there will be a transfer of title which meets the reporting criteria (of residential real estate, without conventional financing, into a trust or entity) it is a reportable transaction. The Rule makes one exception for a category of transfer that might be used in an estate plan: “A transfer made for no consideration by an individual, either alone or with their spouse, to a trust of which that individual, their spouse, or both of them, are the settlor or grantor”.

Consequently, the commonly seen transfer from two spouses or from a surviving spouse of a principal residence or vacation home into a third party trustee or an LLC for no consideration and without mortgage financing will need to be reported to FinCEN.

What needs to be reported?

Readers are directed to the full Rule, the FAQs, and the Proposed Collection requirements for complete information, however a summary of the information about the parties to the transaction which must be reported follows:
(Note, since this discussion involves transfers for no consideration, required information about source of funds is omitted)

About the transferee (the trust or entity acquiring title)

If an entity (LLC, Corporation, LLP)

  • Full Legal Name of Entity
  • Trade name or “doing business as” name
  • Street Address for Principal Place of Business (not a P.O. Box)
  • Unique ID: For US entities: IRS TIN
  • For each individual with a 25% or more interest, substantial control or signatory authority in the entity:
    • Full legal name
    • Date of birth
    • Residential address
    • Country of citizenship
    • Tax ID number
    • Type of reportable interest

If a trust

  • Full Legal Name of Trust (as listed on trust instrument)
  • Date Trust instrument was executed (commonly the date on the trust)
  • Unique ID: For US trusts, IRS TIN
  • Is the Trust revocable?
  • For each trustee and beneficiary/beneficial owner as defined
    (unless a minor child, use parent/guardian instead)

    • Full legal name
    • Date of birth
    • Residential address
    • Country of citizenship
    • Type of reportable interest

About the transferor (the individual, trust or entity conveying title)

If an individual, for each,

  • Full legal name
  • Date of birth
  • Residential address
  • Tax ID number

If an entity

  • Full legal name of entity
  • Trade name or “doing business as’ name
  • Street Address for Principal Place of Business (not a P.O. Box)
  • Unique ID: For US entities: IRS TIN

If a trust

  • Full Legal Name of Trust (as listed on trust instrument)
  • Date Trust instrument was executed (commonly the date on the trust)
  • Unique ID: For US trusts, IRS TIN
  • Full legal name of trustee (s)
  • Residential address of trustee (s)
  • Tax ID of trustee (s)

How is the transaction reported? Who does the reporting?

Filing of the report must be done at the FinCEN website. In recently released part of the Rule, FinCEN indicated that it anticipates that there will be 111 distinct fields of which 60 percent must be completed per transaction. However FinCEN also cautions that “significantly more fields may be required for certain highly complex reportable transfers, such as those with multiple beneficial owners …that would require the same fields to be populated for each owner.”

The person responsible for filing the report is also set forth in the Rule and FinCEN  has created a ‘cascade’ of “reporting persons’ based on their role in the transaction. The first (of the 7 options) is the settlement agent, followed by the person who prepared the settlement statement, the person who filed the deed, the person who issued title insurance, the person who disbursed funds, the person who did the title examination and the person who drafted the deed.

In the common scenario for this discussion, the only likely roles for the estate planning attorney are “the person who filed the deed” and “the person who drafted the deed”, and that is most likely to also be the attorney preparing the estate plan. The Rule also requires that the report include information about the ‘reporting person’ as part of the report.

What are some of the practical concerns?

Unlike conventional ‘cash sales’, these transactions usually will not involve ‘strangers to the transaction’. The estate planner should be able to collect all the pertinent information about the client who is transferring title into the estate planning entity or trust. There may, however, be some reluctance on the part of the client to have all this information delivered to the US government, particularly when one of the objectives of the transfer is to shield the names of the actual parties to the transaction.

In some instances, the reporting will be made more complicated by the fact that the transfer is from a third party, or involves persons or entities of foreign origin. In those cases the information may be more difficult to collect, and in the case of a sale, the seller may be reluctant to comply.

The final and probably greatest impact will be on the office of the attorney doing the estate plan. Depending on volume, and using FinCEN estimates that each file will require approximately an hour to process for reporting, those law firms will be substantially impacted by the Rule.

Ruth Dillingham, Esq. NTP
Dillingham Consulting LLC
PO Box 691
Barnstable, MA 02630
rdillingham@dillinghamconsultingllc.com