The CTA’s Impact Your Estate Plan

Under the Corporate Transparency Act (CTA), owners of certain business entities must file a report with the federal government, including details about their entity’s ownership. The CTA was enacted to combat money laundering, terrorist financing, tax fraud, and other illegal activities. If you have an entity (corporation, limited liability company, family limited partnership, etc.) as part of your existing estate plan, this is essential information you will need to know to ensure that you comply with the new law.

What is the Corporate Transparency Act?

The CTA is a law that requires business entities identified as reporting companies to disclose certain information about the company and its owners to the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN). Un der the CTA, a reporting company is defined as a corporation, limited liability company (LLC), or other similar entity (i) created by filing a document with the secretary of state or a similar office under the laws of a state or Indian tribe or (ii) formed under the laws of a foreign country and registered to do business in the United States. [1] The following information about the reporting company must be included in the report[2]:

1. company’s legal name and any trade names or doing business as (d/b/a) name

2.    street address of the principal place of business

3.    jurisdiction where the business was formed

4.    tax identification number

Additionally, the reporting company must provide the following information to FinCEN about its beneficial owners, defined as persons who hold significant equity (25 percent or more ownership interest) in the reporting company or who exercise substantial control over the reporting company[3]:

1.    full legal name

2.    date of birth

3.    current address

4.    unique identification number from an acceptable identification document

For reporting companies created on or after January 1, 2024, the same information must be provided about the company's applicant, who is the person that files the creation documents for the reporting entity.

Note: Although a trust is not considered to be a reporting company under the CTA, if your trust owns an interest in a reporting company, such as an LLC, certain information about your trust may also have to be disclosed under the CTA because it may be deemed to be a beneficial owner.

Does the CTA impact you?

Many business regulations apply only to large businesses, but the CTA specifically targets smaller entities. If you own a small business, you may be subject to this act unless your business falls under one of the stated exemptions, which primarily apply to industries that are already heavily regulated and have their own reporting requirements. Your company may also be exempt from the reporting requirements if it employs more than 20 full-time employees, filed a return showing more than $5 million in gross receipts or sales, and has a physical office located within the United States. [4]

Complying with the requirements of the CTA is of the utmost importance if you own a business entity or have one as part of your estate plan. We routinely create entities that might qualify as reporting companies as part of our clients' estate plans. These include LLCs and family limited partnerships.

Limited Liability Companies

An LLC is a business structure that can own many types of accounts and property. These entities can be used to provide asset protection and to avoid probate.

Asset Protection

Because an LLC is a separate legal entity from its members, the LLC's creditors can typically recover only business debts from the LLC's money and property, not the member's personal accounts or property, also, if the proper formalities are in place, the member's personal creditors may not be able to reach the LLC's accounts and property to satisfy the member's individual debts.

Note: In some states, a single-member LLC does not enjoy the same protection from the member's personal creditors. The rationale of these laws is that your creditors should be able to recover your personal debts through your LLC interests to satisfy their claims because there are no other members that will be negatively impacted by the seizure of money and property owned by the LLC.

Probate Avoidance

Anything that the LLC owns—retitled into the name of the LLC during your lifetime, bought by the LLC, or transferred by operation of law at your death—will not go through the

public, costly, and time-consuming probate process. The probate process only transfers

accounts and property that you owned at your death. By using an LLC to own accounts and property, the LLC—not you—owns them. However, if you own the membership interest in your own name, the transfer of the membership interest at your death may still need to go through the probate process.

Family Limited Partnerships

A family limited partnership (FLP) is an entity owned by two or more family members, created to hold the accounts, properties, or businesses contributed by one or more family members. An FLP has at least one general partner who is responsible for managing the partnership, has unlimited liability, and is compensated by the partnership for their work under the partnership agreement. An FLP also has one or more limited partners who may vote on the partnership agreement but are not authorized to manage the partnership. The limited partners receive the partnership's income and profits but have no personal liability for its debts or obligations.

Asset Protection

This estate planning strategy is helpful because an FLP can help protect accounts, properties, and businesses held by the entity from your and your family's creditors, because you and your family do not own those items as individuals, but instead are owned by the entity. If a creditor obtains a judgment against you or your family for a claim not related to the FLP, it is more difficult for the creditor to access anything that the FLP owns to satisfy that claim.

Tax Planning

Also, because of its lack of control and restrictions on selling a partnership interest, the value

The value of a limited partnership interest that you give to a family member can be discounted, allowing you to maximize your annual gift tax exclusion and lifetime estate and gift tax exemptions.

What do you have to do to comply with the CTA?

To comply with the act, you should gather the required information for all reporting companies you own and all other beneficial owners. For entities created before January 1, 2024, submit the initial reports for each reporting company by January 1, 2025. For reporting companies created after January 1, 2024, the initial report is due within 30 days of the entity's creation. Please note, however, that a new rule has recently been proposed that would temporarily extend this deadline from 30 to 90 days for business entities formed during 2024. If implemented, this rule would allow additional time to understand and comply with the new requirements.

Having a business entity as part of your estate plan can be an excellent tool depending on your unique situation. If you currently have one of these entities or are considering forming one, please reach out to us to discuss next steps to ensure you fully comply with the CTA requirements.

If a loved one has recently passed and you are unsure what to do, please get in touch with TULLER LAW so we can help you restore stability and clarity to your life. Click here to schedule your meeting.

Footnotes

[1] 31 U.S.C. § 5336(a)(11)

[2] 31 C.F.R. § 1010.380(b)(1)(i)

[3] 31 U.S.C. § 5336(b)(2)(A)

[4] Id. § 5336(a)(11)(B)(xxi)

Estate Plan Lessons from DeMuth v. Commissioner

Lifetime gifts are a popular way to reduce estate and inheritance taxes. Currently, only estates worth $13.99 million or more in 2025, and $15 million in 2026, are subject to the federal estate tax. Twelve states and the District of Columbia levy an additional estate or inheritance tax.

To lower their taxable estate at death, an individual may consider giving gifts to friends and family members. The timing and form of gifts have essential estate planning implications, however, as a recent opinion from the United States Court of Appeals for the Third Circuit demonstrates. In that case, the failure to complete gifts in the form of checks before the donor'’ death cost his estate—and ultimately his heirs—a significant sum

Case Summary

William DeMuth, Jr., of Pennsylvania, executed a power of attorney (POA) in January 2007, appointing his son, Donald DeMuth, as his agent. In this capacity, Donald made annual monetary gifts to family members from 2007 to 2014.

On September 6, 2015, shortly after William was diagnosed with an end-stage medical condition, Donald signed and delivered seven checks to family members worth $464,000. William passed away on September 11, 2015. At the time of his death, just one of the eleven checks had been paid from his account. Ten of the eleven checks, totaling $436,000, had not been paid before William's death, although three of them were deposited on the day of his death.

Donald, the executor of William's estate, excluded the value of all eleven checks from William's account when reporting the gross estate. The Internal Revenue Service (IRS), however, concluded that the account's value had been underreported by $436,000, the amount of the ten checks, and issued a notice of estate tax deficiency for $179,130.

Donald filed an appeal with the Tax Court, where the IRS agreed to exclude the three checks deposited on the day William died. This reduced the tax deficiency to $131,774, but the Tax Court held that the funds from the remaining seven checks were part of William's estate because, under Pennsylvania law, they were not completed gifts before his death.

The estate appealed to the Third Circuit, arguing that the gifts were completed gifts in contemplation of William's death, and as a result were completed gifts in "causa mortis." In Pennsylvania, gifts causa mortis differ from gifts inter vivos (i.e., a gift or transfer made during someone's lifetime). A gift by check, deemed a gift causa mortis, is complete when the check is delivered to the recipient, not when the recipient deposits it.

Donald lost the appeal, with the court ruling that the estate did not show William wrote the checks as gifts in causa mortis. "Thus, the value of the seven remaining checks was improperly excluded from the gross estate," the court concluded. [1]

Estate Planning Takeaways

The outcome of the seven checks being included in William's estate is that the estate tax increased by more than $130,000. Then, there were the estate's legal and court fees paid to litigate the case in a losing effort, on top of nearly eight years of dealing with the courts and the IRS.

With better planning, the money paid in taxes and court costs could have been passed on to Donald and other heirs. The federal estate tax amount was also likely in addition to taxes owed in Pennsylvania, which imposes an inheritance tax that ranges from 4.5 to 15 percent on eligible transfers. [2]

Other estate planning takeaways from DeMuth v. Commissioner include the following:

1.    If the deathbed gifts made by Donald DeMuth on behalf of his father had been made by a bank check or wire—rather than a personal check—they could have been excluded from the taxable estate because a bank check or wire represents funds already withdrawn from the payer's account.

2.    The US Code and Treasury Regulations were relevant to DeMuth v. Commissioner, but state law governs property law. Relevant to this case, the distinction in Pennsylvania law between gifts inter vivos and gifts causa mortis was critical.

3.    Knowing that his father was in poor health, Donald should have ensured that the gift checks were received and deposited before William died.

4.    A similar mistake is made when checks are written at the end of the year to take advantage of the annual gift exclusion ($17,000 per person in 2023). If the check is not cashed or deposited by year-end, it is not considered complete until the following year and, therefore, is not a gift made in the year the check is written. This could result in a doubling of gifts, the filing of a gift tax return, and a reduction in the lifetime exemption amount.

5.    State tax laws should also be considered when timing gifts. Pennsylvania, for example, does not have a gift tax, but all gifts greater than $3,000 made within 12 months of the decedent's date of death are pulled back into the estate and subject to Pennsylvania inheritance taxes. [3]

Putting Off Estate Planning Can Have Unintended Consequences

DeMuth v. Commissioners is a lesson in what can happen when estate planning is put off to the last minute. Gifting can be an effective way to reduce estate and inheritance taxes and leave more money to heirs—but to maximize the unified estate and gift tax exclusions, it should be a long-term strategy.

Today's all-time high exclusion levels are set to be cut in half in 2026. With this drastic change on the horizon, families may want to revisit their estate plan now and consider actions such as creating a family trust. An estate plan should also account for expected asset appreciation that could put an estate over the exemption amount come 2026.

Even if you do not think upcoming changes in the tax law will affect your estate plan, it is still essential to review your plan every few years. Changes in your life and the lives of loved ones can make it necessary to modify your will or trust terms or reconsider trustees and executors. Like William DeMuth, you could also face a terminal medical condition that forces you to accelerate certain aspects of your plan.

Whatever your plan is, do not delay taking the necessary steps to make it official. Putting off estate planning can affect your estate, your heirs, and your legacy. When your plans change, our attorneys are here to help. Call or contact us to schedule an appointment.

If a loved one has recently passed and you are unsure what to do, please contact us so we can help you restore stability and clarity to your life. Click here to schedule a meeting.

Footnotes

[1] DeMuth v. Comm'r, No. 22-3032 (3d Cir. July 10, 2023), https://law.justia.com/cases/federal/appellate-courts/ca3/22-3032/22-3032-2023-07-12.html

[2] Pa. Dep't of Revenue, Inheritance Tax, https://www.revenue.pa.gov/TaxTypes/InheritanceTax/Pages/default.aspx (last visited October 27, 2023)

[3] Inheritance Tax, Art. XXI § 2107(c)(3), https://www.legis.state.pa.us/cfdocs/legis/LI/uconsCheck.cfm?txtType=HTM&yr=1971&sessInd=0&smthLwInd=0&act=002&chpt=21

Blindsided: The Michael Oher Conservatorship Controversy Explained

Michael Oher has had a remarkable life so far. Born to a single mother struggling with addiction and growing up in and out of foster care, Oher went on to star as a University of Mississippi football player and was selected in the first round of the 2009 NFL draft. He played eight seasons in the NFL, won a Super Bowl in 2016, and is the subject of a book that inspired an Oscar-winning movie, The Blind Side.

Sean and Leigh Anne Tuohy, the Tennessee couple who took Oher into their home when he was in high school and were appointed as his estate's conservators, are prominently featured in The Blind Side. But Oher has recently alleged that, contrary to the movie's portrayal, the Tuohys never actually adopted him. Oher alleges that the Tuohy's instead tricked him into agreeing to the conservatorship and unjustly profited from his trust in them.

While the accusations will play out in court, they raise questions about conservatorships, when they are necessary, and how they affect estate planning.

What Is a Conservatorship?

A conservatorship is a court-ordered arrangement that gives one or more people (a conservator) legal authority to manage the affairs of another person (a conservatee or ward).

Most jurisdictions—including Tennessee, where the Michael Oher conservatorship was created—recognize two types of conservatorships:

1.    A conservatorship of the person authorizes a conservator to manage the conservatee's personal affairs, including their healthcare and living arrangements.

2.    A conservatorship of the estate grants the conservator the authority necessary to supervise the conservatee's financial affairs, such as managing their money, paying their bills, and, in some instances, setting up an estate plan for them.

Conservatees are often children, but they can also be adults who are incapacitated, have developmental or age-related disabilities, or are otherwise deemed by the court to be unable to handle their own financial or personal affairs. A famous example of this is the Britney Spears conservatorship that was set up following her pattern of erratic behavior and placement in a psychiatric hospital for observation. In Spears's case, her conservatorship was split into two parts—one for her estate and finances and one for her as a person. [1]

A conservatorship may be established following a court petition by a friend or relative asking for the appointment of a conservator. The petition must explain the basis for establishing the proposed conservatorship. In many cases involving adult conservatorship, the petition must indicate that the conservatee is at risk of injury to their person due to their inability to manage their daily needs or make medical decisions, or of financial exploitation or involuntary depletion of their assets. Following an investigation and a hearing, the court decides whether a conservatorship is warranted.

If a conservatorship is granted, a conservator is named, and their specific powers are set out in a court order. Typically, the court requires conservators to file annual financial accounts or plans for the care of the person, depending on the type of conservatorship.

Michael Oher's Conservatorship

In 2004, shortly after Oher turned 18 and about two months before he signed on to play football at Ole Miss, a Tennessee judge entered an order establishing a conservatorship over Oher with the Tuohys as conservators. At the time, the conservatorship was established with the permission of Oher and his biological mother. According to the conservatorship filing, a judge declared that the Tuohys "should have all powers of attorney to act on his behalf and further that Oher shall not be allowed to enter into any contracts or bind himself without the direct approval of his conservators."[2]

Legal experts say the 2004 filing for a conservatorship of the person is unusual because Oher had "no known physical or psychological disabilities." The petition notes that he was a good student and made the dean's list his sophomore year.

In an August 14 petition to terminate the conservatorship, which was allegedly scheduled to end when Oher was 25 years old, Oher claimed that the Tuohys deceived him and did not act in his best interest as conservators. [3] His petition stated that he did not understand that he was giving up his right to contract for himself, the Tuohys misrepresented the conservatorship as an adoption, and that "the lie of adoption" enabled the Tuohys to enrich themselves at the expense of Oher, including from film royalties.

In addition to seeking to sever the conservatorship, the lawsuit filed by Oher sought a full accounting of assets; an injunction prohibiting the Tuohys from using his name, image, and likeness; compensatory and punitive damages; and costs and attorneys' fees.

Adoption versus Conservatorship

Adopting Oher would have made him a member of the Tuohy family, no different in the eyes of the law than the Tuohys' two biological children. Adoption would also have allowed Oher to retain power over his own financial affairs—a power that he surrendered under the conservatorship.

The Tuohys say they are blindsided by Oher's accusations that they profited from the conservatorship. Their version of events portrays the conservatorship as necessary to help Oher obtain a driver's license, health insurance, and assistance with the college admissions process. [4] Sean Tuohy said lawyers advised him at the time that adoption was not an option because Oher was 18 and a legal adult.

Many states, including Tennessee, however, allow adult adoption. Adoption laws in Tennessee permit adoption at any age. When the adoptee is over the age of 18, consent from birth parents is not needed—only the permission of the adopted adult. This law is apparently not new. As part of a fact check about adult adoptions in the state, a Tennessee adoption attorney told Fox 13 Memphis that they have been doing them for decades. [5]

Conservatorships and Estate Planning

The Tennessee judge overseeing the case has signed an order ending the conservatorship. [6] However, Oher's accusations against the Tuohys will still have to play out in court. Among the legal questions to be answered are whether the Tuohys filed an annual report with an accounting of Oher's finances with the probate court and if they have received money on Oher's behalf and properly disbursed it to him.

Conservatorships, illustrated by the Michael Oher and Britney Spears cases, can sometimes lead to family feuds over a conservator's intentions toward a ward. Taking away somebody's legal rights to make decisions—and giving those rights to somebody else—is often reserved only for extreme situations, such as when somebody is brain-injured, suffers a stroke, is in a coma, or develops dementia.

In such cases where the court declares that a person is unable to manage their own affairs, a conservator may be appointed. One of the rights the court may grant the conservator is the power to make an estate plan for the conservatee. Depending on the situation and specific authority granted to the conservator, however, a person subject to a conservatorship may still have the capacity to set up their own estate plan. The ward may later revoke or amend a conservator-drafted estate plan if they can show that they possess testamentary capacity or that their rights, as delegated by the court, are restored.

Given the restrictive nature of a conservatorship and the lengthy court process to establish it, families may want to avoid it unless there is an imminent need that cannot be addressed through less restrictive means. If estate planning documents, such as powers of attorney for finances and healthcare, are already in place, the family can avoid a conservatorship and step in to manage finances or make important decisions as soon as it becomes necessary.

Plan Early and Often to Avoid Difficult Choices Later

Failure to plan for all possibilities—even those we would rather not think about—can have unintended consequences. If you neglect estate planning now, you could limit your future options regarding issues such as conservatorships, probate, and inheritance.

Maybe there is an adult family member whom you never legally adopted but would like to adopt now for estate planning purposes. There might be lingering questions about what would happen to you, your spouse, your adult children, or your aging parents if disability or incapacity suddenly struck. Alternatively, it could be the case that a loved one is already showing signs of dementia and may not have the capacity to execute estate planning documents.

Our estate planning attorneys are in the business of addressing these sensitive questions professionally and legally, and of creating a plan that leaves nothing to chance. To start planning today, contact our office and schedule a meeting.

If a loved one has recently passed and you are unsure what to do, please get in touch with us so we can help you restore stability and clarity to your life. Click here to schedule a meeting.

Footnotes

[1] Britney Spears: Singer's Conservatorship Case Explained, BBC (November 12, 2021), https://www.bbc.com/news/world-us-canada-53494405

[2] Sean Neumann, Attorneys Explain What's "Puzzling" about Michael Oher's Conservatorship Filing—and What's Next, People (August 21, 2023), https://people.com/attorneys-explain-what-is-puzzling-about-michael-oher-s-conservatorship-filing-and-what-is-next-7706819

[3] In re Michael Jerome Williams, Jr. a/k/a Michael Jerome Oher, No. C-010333 (Prob. Ct. of Shelby Cnty. Tenn. August 14, 2023), https://www.wkrn.com/wp-content/uploads/sites/73/2023/08/Michael-Oher-Lawsuit.pdf

[4] Adrian Sainz & Teresa M. Walker, Devastated Tuohys Ready to End Conservatorship for Michael Oher, Lawyers Say, AP (August 16, 2023), https://apnews.com/article/nfl-michael-oher-tuohys-blind-side-movie-1bebe2ba9ee2ba60ac806dabab4f6d4c

[5] Katrina Morgan, Yes, It Is Legal to Adopt Someone Over the Age of 18 in Tennessee, 13NewsNow (August 17, 2023), https://www.13newsnow.com/article/news/verify/national-verify/yes-it-is-legal-to-adopt-someone-over-the-age-of-18-in-tennessee/536-2b3ffb4f-c80d-4ea4-9d46-e0db4d914d71

[6] Brynn Gingras & Emma Tucker, Judge Terminates Tuohy Family Conservatorship over Former NFL Player Michael Oher, Depicted in The Blind Side, CNN (September 30, 2023), https://www.cnn.com/2023/09/29/us/michael-oher-tuohy-conservatorship-termination/index.html

Estate Planning Checklist for Californians in 2025

Estate planning isn’t just for the wealthy — it’s for anyone who wants to protect their family and legacy. Here’s a simple checklist to start your plan in 2025:

1. Create a revocable living trust

2. Draft a pour-over will

3. Create a financial Durable Power of Attorney

4. Create advanced health care directives

5. Title assets correctly (fund your trust)

6. Name guardians for minor children (if applicable)

7. Review and update beneficiary designations

8. Plan for digital assets (online accounts, cryptocurrency)

Your Next Step:

Work with an experienced estate planning attorney to tailor documents to your situation.

At Tuller Law, we make the process clear, efficient, and personalized.