8 ms·

FinCEN proposes new rule for residential real estate held in trusts or LLCs

75 points by the88doctor 3y ago

mattmaroon 3y ago
I wonder if this is inspired at least in part by the Russian invasion of Ukraine. Their oligarchs are known to use this method quite a bit.
instagib 3y ago
I tried to parse a little of this so, FinCEN wants to know who profits off of real estate if you are a 5% equity share holder or 10% if at a director level in an organization. Will FinCEN publish these records? It would defeat the purpose of putting a home in an llc for anonymity. Under the proposed rule, persons involved in real estate closings and settlements would continue to be exempt from the anti-money laundering compliance program requirements of the Bank Secrecy Act. I.e. loans, banks.
- deleted 3y ago
  [deleted]
- mikeyouse 3y ago
  The records aren't publicly available - they'll provide them to the Feds and to anyone who provides a valid court order; https://www.fincen.gov/news/news-releases/fact-sheet-beneficial-ownership-information-access-and-safeguards-final-rule#:~:text=FinCEN%20may%20disclose%20BOI%20to%20State%2C%20local%2C%20and%20Tribal%20law,a%20criminal%20or%20civil%20investigation https://www.fincen.gov/news/news-releases/fact-sheet-benefic....
  - gottorf 3y ago
    > they'll provide them to the Feds That's too bad; methinks the Feds should also need a court order. Though, I suppose with FISA courts rubber-stamping warrants, it wouldn't even be a nuisance.
    - mikeyouse 3y ago
      Depends on your level of cynicism whether they'll follow the guardrails, but they do have some; > Federal government agency access to BOI. Under the Access Rule and as authorized by the CTA, FinCEN may disclose BOI to Federal agencies engaged in national security, intelligence, or law enforcement activity if the requested BOI is for use in furtherance of such activity. “Law enforcement activity” includes both criminal and civil investigations and actions, such as actions to impose civil penalties, civil forfeiture actions, and civil enforcement through administrative proceedings. Prior to requesting BOI, Federal agency users will be required to certify that the agency is engaged in a national security, intelligence, or law enforcement activity and that the information requested is for use in furtherance of that activity. They will also be required to provide the specific reasons why the requested information is relevant to the activity.
- neilv 3y ago
  > It would defeat the purpose of putting a home in an llc for anonymity. That's a legitimate desire, and I think we should make privacy and the motives behind it available to everyone, not only those who can afford the expense and effort to set up and maintain an LLC. (I'd expect the solution to be a combination of changes: outlaw most data-brokering and trading of personal data, hold organizations responsible for the data they hold so much that they treat unnecessary personal data like an existential-threat toxic liability, change practices to make SWAT-ing not be such a risk even if some psycho did get hold of someone's address, hold demagogues responsible for using conspiracy theories they know are false to incite mentally ill people, and more.)
  - phkahler 3y ago
    >> It would defeat the purpose of putting a home in an llc for anonymity. > That's a legitimate desire, and I think we should make privacy and the motives behind it available to everyone, not only those who can afford the expense and effort to set up and maintain an LLC. I'm on the fence about that. Why should someone not be able to determine who owns a particular piece of property?
    - lightweb 3y ago
      SWATing. Security concerns for certain people.
egberts1 3y ago
It is common for liberty-oriented officials to put their own home into an LLC and have an appointed officer/manager as the public-facing contact. I am quite sure that rich and powerful people will do some decent but firm pushback if FinCen goes too far in making records public. Edited: replaced 'privacy-oriented' with 'liberty-oriented' in light of Bruce Schneier's blog.
- wavefunction 3y ago
  If they have nothing to hide they have nothing to fear. I would take the hypothetical fear and pushback by these "types" as a strong positive signal that this is an effort that is vitally worth doing for society.
  - dogman144 3y ago
    They have to fear swatting. If you’ve got the time and knowledge of where the individual likely lives, a hunting app for instance will show who owns each land plot in clear-text lol.
    - wavefunction 3y ago
      Ok but I have to fear that, what's the purpose for different privileges? My info is publicly available.
      - dogman144 3y ago
        If you’ve got the time and effort, it doesn’t have to be. These “extreme privacy” measures are available to the laymen with some time/effort/money, or definitely for someone with a tech job. One of the main steps is buying or renting under a LLC. Anyone can do that with planning.
    - 1024core 3y ago
      You want to find out where someone lives? Head over to zabasearch.com and search away!
Fin_Code 3y ago
This is deeply needed, one of the big causes of housing inflation is using it to launder money. Higher housing costs are better because you can launder more. Its like when rich people can't have a money trail for some shady activity so they sell art to each other for a wild amount. This will require all owners to be named instead of a nameless llc. Should help curb the process.
- max_ 3y ago
  Can't some lawyer just be used as a proxy for holding the real estate?
  - singleshot_ 3y ago
    This is what a trust is, more or less. Legal title, beneficial ownership, and control can all be vested in different entities.
- psychlops 3y ago
  > one of the big causes of housing inflation is using it to launder money I'd love a link backing this bold assertion.
  - wmf 3y ago
    You'll find plenty or none depending on your desired level of detail. After reading about this topic for years I still don't understand how to use real estate for money laundering.
    - bombcar 3y ago
      In very specific cases it can be used to avoid certain countries' laws about exporting cash/value. But that's not going to be a major source of real estate transactional volume.
      - phkahler 3y ago
Centigonal 3y ago
I think this is great for AML, and also for making the activities of institutional buyers of real estate a little clearer. I'm reminded of this article specifically: https://www.sfchronicle.com/projects/2022/veritas-san-francisco-landlord/ https://www.sfchronicle.com/projects/2022/veritas-san-franci...
- singleshot_ 3y ago
  It’s also great for sending a swat team to your house, which might have a bit more sudden of an impact than the change you’re envisioning.
  - tptacek 3y ago
    What does this have to do with SWAT teams?
    - singleshot_ 3y ago
      If a person knows where another person lives, the first person can send a heavily armed SWAT detachment to the second person’s home. This is one reason my home is held in trust, so it’s a little more difficult for some idiot to try this. I imagine if this route was banned, it would be a lot easier to figure out where a person lives, which would generally result in decreased privacy, safety, and security.
  - Centigonal 3y ago
    The proposed FinCEN rule is specific to non-financed (i.e. all-cash) transfers to companies or trusts. That in itself rules out the vast majority of private individuals. I'm sure they could also add carve-outs for primary residences or otherwise reduce the impact of this rule on private individuals. That being said, I think the number of people who live in fear of being swatted in their homes is at least two orders of magnitude smaller than the number of people who rent a home owned by a mysterious and unaccountable corporate landlord.
    - singleshot_ 3y ago
1024core 3y ago
How do these trusts, LLCs, etc. work for inheritance? Can I bypass inheritance issues by, say, putting my house in a trust and making my kid one of the "owners" of the trust? Then when I pass away, s/he gets control of the trust and thus own the house?
- toomuchtodo 3y ago
  There is nuance, but yes. It doesn't avoid taxes except in certain edge cases; it is a more efficient form of probate. The target of the assets is the "beneficiary." https://smartasset.com/estate-planning/how-to-avoid-estate-taxes-with-trusts https://smartasset.com/estate-planning/how-to-avoid-estate-t... https://www.nerdwallet.com/article/investing/estate-planning/will-vs-trust https://www.nerdwallet.com/article/investing/estate-planning...
- whitej125 3y ago
  More specifically... "probate issues". If you die with assets... you assets are going to be transferred to beneficiaries in accordance with a will if you have one. It's a lengthy legal process called probate. Because its going through the court system the filings are all public record too. If you put your assets into a trust (generally a revocable or living trust)... when you die you aren't dying with any assets. The trust "lives on" and has the rules for distribution codified into it. No probate court. No public record of assets, etc. Tends to be a faster, more efficient for everyone process as I understand it.
dikaio 3y ago
We have a business in Las Vegas incorporated as an LLC and incorporated in Wyoming to hold real estate that we purchase overtime and leave to our kids and just yesterday we were notified that FinCen is requesting names, contact information, IDs (passport, drivers license) and percentage owned in the corporation. I would have thought they would have had all that information prior from our filings. In my eyes there’s nothing wrong with any of this, it’s all standard procedure but my assumption is that it’s all rooted from an underlying issue, the US balance sheet keeps going up and the government is looking to cross all Ts and dot all I’s on where they can collect. The underlying issue never gets fixed, that’s that the government can’t stop spending. Fix government, fixes the issue.
- ragnot 3y ago
  So to clarify, you have an LLC in vegas owned by a holding LLC in Wyoming? Is that only for anonymity?
  - dikaio 3y ago
    No the LLC in Las Vegas has nothing to do with the corporation in Wyoming, i provided it as reference to show that one may have a business in one state but be incorporated in another to protect personal assets, it’s quit common. We could have accomplished the same by placing each property in an a Nevada LLC but Wyoming corporations are cheaper, arguably easier to manage with better protection. Both states have no State taxes.
- cyanydeez 3y ago
  good. wealth transfer is obscene.
  - dikaio 3y ago
    You are either sorely misinformed or highly inept on the subject. [edit] to provide clarity. Holding assets in trusts or LLCs has nothing to do with doing anything illegal, and you will find politicians, people working in 3 letter agencies etc all do the same, we all pay taxes just like you. So attempting to leaving a comment with a critical view particularly in contexts where it might be seen as unfair, unjust, or disproportionately benefiting the already wealthy at the expense of others just shows a lack of understanding of the subject. Even though my initial comment has nothing to do with taxes I will leave you with this. "Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands." This quote captures the essence of tax planning and the legal right of individuals and businesses to minimize their tax liabilities within the bounds of the law. - Judge Learned Hand

75 points by the88doctor 3y ago

I wonder if this is inspired at least in part by the Russian invasion of Ukraine. Their oligarchs are known to use this method quite a bit.

instagib 3y ago

I tried to parse a little of this so, FinCEN wants to know who profits off of real estate if you are a 5% equity share holder or 10% if at a director level in an organization. Will FinCEN publish these records? It would defeat the purpose of putting a home in an llc for anonymity. Under the proposed rule, persons involved in real estate closings and settlements would continue to be exempt from the anti-money laundering compliance program requirements of the Bank Secrecy Act. I.e. loans, banks.

deleted 3y ago
[deleted]
mikeyouse 3y ago
The records aren't publicly available - they'll provide them to the Feds and to anyone who provides a valid court order; https://www.fincen.gov/news/news-releases/fact-sheet-beneficial-ownership-information-access-and-safeguards-final-rule#:~:text=FinCEN%20may%20disclose%20BOI%20to%20State%2C%20local%2C%20and%20Tribal%20law,a%20criminal%20or%20civil%20investigation https://www.fincen.gov/news/news-releases/fact-sheet-benefic....
- gottorf 3y ago
  > they'll provide them to the Feds That's too bad; methinks the Feds should also need a court order. Though, I suppose with FISA courts rubber-stamping warrants, it wouldn't even be a nuisance.
  - mikeyouse 3y ago
    Depends on your level of cynicism whether they'll follow the guardrails, but they do have some; > Federal government agency access to BOI. Under the Access Rule and as authorized by the CTA, FinCEN may disclose BOI to Federal agencies engaged in national security, intelligence, or law enforcement activity if the requested BOI is for use in furtherance of such activity. “Law enforcement activity” includes both criminal and civil investigations and actions, such as actions to impose civil penalties, civil forfeiture actions, and civil enforcement through administrative proceedings. Prior to requesting BOI, Federal agency users will be required to certify that the agency is engaged in a national security, intelligence, or law enforcement activity and that the information requested is for use in furtherance of that activity. They will also be required to provide the specific reasons why the requested information is relevant to the activity.
neilv 3y ago
> It would defeat the purpose of putting a home in an llc for anonymity. That's a legitimate desire, and I think we should make privacy and the motives behind it available to everyone, not only those who can afford the expense and effort to set up and maintain an LLC. (I'd expect the solution to be a combination of changes: outlaw most data-brokering and trading of personal data, hold organizations responsible for the data they hold so much that they treat unnecessary personal data like an existential-threat toxic liability, change practices to make SWAT-ing not be such a risk even if some psycho did get hold of someone's address, hold demagogues responsible for using conspiracy theories they know are false to incite mentally ill people, and more.)
- phkahler 3y ago
  >> It would defeat the purpose of putting a home in an llc for anonymity. > That's a legitimate desire, and I think we should make privacy and the motives behind it available to everyone, not only those who can afford the expense and effort to set up and maintain an LLC. I'm on the fence about that. Why should someone not be able to determine who owns a particular piece of property?
  - lightweb 3y ago
    SWATing. Security concerns for certain people.

egberts1 3y ago

It is common for liberty-oriented officials to put their own home into an LLC and have an appointed officer/manager as the public-facing contact. I am quite sure that rich and powerful people will do some decent but firm pushback if FinCen goes too far in making records public. Edited: replaced 'privacy-oriented' with 'liberty-oriented' in light of Bruce Schneier's blog.

wavefunction 3y ago
If they have nothing to hide they have nothing to fear. I would take the hypothetical fear and pushback by these "types" as a strong positive signal that this is an effort that is vitally worth doing for society.
- dogman144 3y ago
  They have to fear swatting. If you’ve got the time and knowledge of where the individual likely lives, a hunting app for instance will show who owns each land plot in clear-text lol.
  - wavefunction 3y ago
    Ok but I have to fear that, what's the purpose for different privileges? My info is publicly available.
    - dogman144 3y ago
      If you’ve got the time and effort, it doesn’t have to be. These “extreme privacy” measures are available to the laymen with some time/effort/money, or definitely for someone with a tech job. One of the main steps is buying or renting under a LLC. Anyone can do that with planning.
  - 1024core 3y ago
    You want to find out where someone lives? Head over to zabasearch.com and search away!

Fin_Code 3y ago

This is deeply needed, one of the big causes of housing inflation is using it to launder money. Higher housing costs are better because you can launder more. Its like when rich people can't have a money trail for some shady activity so they sell art to each other for a wild amount. This will require all owners to be named instead of a nameless llc. Should help curb the process.

max_ 3y ago
Can't some lawyer just be used as a proxy for holding the real estate?
- singleshot_ 3y ago
  This is what a trust is, more or less. Legal title, beneficial ownership, and control can all be vested in different entities.
psychlops 3y ago
> one of the big causes of housing inflation is using it to launder money I'd love a link backing this bold assertion.
- wmf 3y ago
  You'll find plenty or none depending on your desired level of detail. After reading about this topic for years I still don't understand how to use real estate for money laundering.
  - bombcar 3y ago
    In very specific cases it can be used to avoid certain countries' laws about exporting cash/value. But that's not going to be a major source of real estate transactional volume.
    - phkahler 3y ago

Centigonal 3y ago

I think this is great for AML, and also for making the activities of institutional buyers of real estate a little clearer. I'm reminded of this article specifically: https://www.sfchronicle.com/projects/2022/veritas-san-francisco-landlord/ https://www.sfchronicle.com/projects/2022/veritas-san-franci...

singleshot_ 3y ago
It’s also great for sending a swat team to your house, which might have a bit more sudden of an impact than the change you’re envisioning.
- tptacek 3y ago
  What does this have to do with SWAT teams?
  - singleshot_ 3y ago
    If a person knows where another person lives, the first person can send a heavily armed SWAT detachment to the second person’s home. This is one reason my home is held in trust, so it’s a little more difficult for some idiot to try this. I imagine if this route was banned, it would be a lot easier to figure out where a person lives, which would generally result in decreased privacy, safety, and security.
- Centigonal 3y ago
  The proposed FinCEN rule is specific to non-financed (i.e. all-cash) transfers to companies or trusts. That in itself rules out the vast majority of private individuals. I'm sure they could also add carve-outs for primary residences or otherwise reduce the impact of this rule on private individuals. That being said, I think the number of people who live in fear of being swatted in their homes is at least two orders of magnitude smaller than the number of people who rent a home owned by a mysterious and unaccountable corporate landlord.
  - singleshot_ 3y ago

1024core 3y ago

How do these trusts, LLCs, etc. work for inheritance? Can I bypass inheritance issues by, say, putting my house in a trust and making my kid one of the "owners" of the trust? Then when I pass away, s/he gets control of the trust and thus own the house?

toomuchtodo 3y ago
There is nuance, but yes. It doesn't avoid taxes except in certain edge cases; it is a more efficient form of probate. The target of the assets is the "beneficiary." https://smartasset.com/estate-planning/how-to-avoid-estate-taxes-with-trusts https://smartasset.com/estate-planning/how-to-avoid-estate-t... https://www.nerdwallet.com/article/investing/estate-planning/will-vs-trust https://www.nerdwallet.com/article/investing/estate-planning...
whitej125 3y ago
More specifically... "probate issues". If you die with assets... you assets are going to be transferred to beneficiaries in accordance with a will if you have one. It's a lengthy legal process called probate. Because its going through the court system the filings are all public record too. If you put your assets into a trust (generally a revocable or living trust)... when you die you aren't dying with any assets. The trust "lives on" and has the rules for distribution codified into it. No probate court. No public record of assets, etc. Tends to be a faster, more efficient for everyone process as I understand it.

dikaio 3y ago

We have a business in Las Vegas incorporated as an LLC and incorporated in Wyoming to hold real estate that we purchase overtime and leave to our kids and just yesterday we were notified that FinCen is requesting names, contact information, IDs (passport, drivers license) and percentage owned in the corporation. I would have thought they would have had all that information prior from our filings. In my eyes there’s nothing wrong with any of this, it’s all standard procedure but my assumption is that it’s all rooted from an underlying issue, the US balance sheet keeps going up and the government is looking to cross all Ts and dot all I’s on where they can collect. The underlying issue never gets fixed, that’s that the government can’t stop spending. Fix government, fixes the issue.

ragnot 3y ago
So to clarify, you have an LLC in vegas owned by a holding LLC in Wyoming? Is that only for anonymity?
- dikaio 3y ago
  No the LLC in Las Vegas has nothing to do with the corporation in Wyoming, i provided it as reference to show that one may have a business in one state but be incorporated in another to protect personal assets, it’s quit common. We could have accomplished the same by placing each property in an a Nevada LLC but Wyoming corporations are cheaper, arguably easier to manage with better protection. Both states have no State taxes.
cyanydeez 3y ago
good. wealth transfer is obscene.
- dikaio 3y ago
  You are either sorely misinformed or highly inept on the subject. [edit] to provide clarity. Holding assets in trusts or LLCs has nothing to do with doing anything illegal, and you will find politicians, people working in 3 letter agencies etc all do the same, we all pay taxes just like you. So attempting to leaving a comment with a critical view particularly in contexts where it might be seen as unfair, unjust, or disproportionately benefiting the already wealthy at the expense of others just shows a lack of understanding of the subject. Even though my initial comment has nothing to do with taxes I will leave you with this. "Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands." This quote captures the essence of tax planning and the legal right of individuals and businesses to minimize their tax liabilities within the bounds of the law. - Judge Learned Hand