Main Street Business

#611 Real Estate Privacy Under Fire: FinCEN’s New Reporting Rule Explained

• Mark J Kohler and Mat Sorensen

Share episode

Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.

0:00 | 20:36

Privacy is under attack again — and real estate investors need to pay attention. A new federal rule tied to FinCEN and the Corporate Transparency Act now requires certain residential real estate transfers to file a Real Estate Report disclosing personal information of LLC owners. If you’re transferring property to an LLC, buying with cash, or using creative financing without a bank involved, this could apply to you starting March 1st.

In this episode of the Main Street Business Podcast, Mark J. Kohler and Mat Sorensen break down exactly when this new reporting requirement is triggered, what information must be disclosed, and the penalties for non-compliance. They also explain key exemptions — including the trust exception — and walk through potential privacy strategies using land trusts, Wyoming LLCs, and layered entity structures to help protect your name while staying compliant. If you own rental property or are actively investing in real estate, this is critical information.

Make sure you understand the rules before your next transfer. Subscribe for weekly tax and legal strategies, leave a comment with your questions, and share this episode with other real estate investors who need to know about this change!

You’ll Learn:

  • What the new FinCEN Real Estate Report is and why it’s being enforced
  • The three specific scenarios that trigger this new federal reporting requirement
  • What personal information must be disclosed (and who has to report it)
  • How this rule connects to the Corporate Transparency Act and beneficial ownership reporting
  • Which real estate transactions are exempt — including the trust exception
  • The risks and penalties for failing to comply
  • How transferring property to an LLC is still critical for asset protection
  • Practical privacy strategies using trusts and Wyoming LLCs
  • How to balance state-level privacy with federal reporting requirements
  • Smart next steps to stay compliant without sacrificing asset protection or overpaying for entity setups

Get a comprehensive tax consultation with one of our Main Street tax lawyers that can build a tax strategy plan with an affordable consultation that will leave you speechless!! 

Here’s the link - https://kkoslawyers.com/services/comprehensive-bus-tax-consult/?utm_source=buzzsprout&utm_medium=description-link&utm_campaign=main-street-business-podcast&utm_content=msbp611-fincen-real-estate-report

Privacy Threat And New Law

SPEAKER_00

Our privacy is under attack again. There's a new law in effect this March 1st. You may not like it.

SPEAKER_01

Anyone who owns 25% or more, their personal information is going to be on this real estate report going to the federal government. You do have to disclose your name, date of birth, address, and social security number.

SPEAKER_00

We are so frustrated by people that are selling these LLCs for twice the price of a real law firm. They're just better marketers or they create more fear. We're like, who the hell are they? Are they a lawyer? No.

SPEAKER_01

Why are you taking legal advice from them?

What Triggers The Real Estate Report

SPEAKER_00

Welcome everybody to the Main Street Business Podcast. My name is Mark Kohler. I'm here with the amazing Matt Sorensen on a topic you do not want to miss. People, our privacy is under attack again. It's getting threatened. We've got the federal government trying to stop money launderers, bless their heart. And they are now after the real estate transaction and real estate transfers via deed. We're back to what basically the BOI under Finson and this corporate transparency act and making sure that we disclose who's actually going to own this real estate is the concept. We got to talk about it. There's a new law in effect this March 1st. And you may not like it.

SPEAKER_01

Yeah, sorry. So this is bad news today, but you need to know about it. And we've got some solutions for you as well. So this is called a real estate report. This is something that gets filed defense in. This will apply in three scenarios. Okay, let me three scenarios.

SPEAKER_00

So you're like, when does this apply? Yeah. So it's this disclosure report, which will tell you what you have to put in it. Yeah, and how you can get around it. But okay, when does it apply?

SPEAKER_01

When does it apply? Let's say that you own real estate in your personal name. You bought it, and now you want to transfer it to an LLC, which is great. You should be doing that for the case.

SPEAKER_00

Don't worry about the banks all upset about the Doom on sale clause, bull crap. You need asset protection. So everybody does this every day.

SPEAKER_01

Yeah, we'll do 100, 200 of these deeds a month. Yes. Or transferring title from a client's personal name to their LLC. Okay. Now, because that is residential real estate where no bank was involved in the loan to the LLC and title ended up in an LLC, that's triggered this real estate report. So there's three things that you have to have: residential real estate, a cash purchase or some type of transaction where there's no bank involved. This could be you transferring to your own LLC and an entity receiving title to the property.

SPEAKER_00

And on that note, four units or less qualifies as residential real estate. So a fourplex, duplex, or single family home. You own a rental property. This could be you owning your own home and just transferring it to an LLC. It could be raw land. And you're like, well, I already have a loan against it. Doesn't matter if you're transferring it to an LLC and there's no closing involved. Think title company, third-party buyer, because if that happens, the bank's going to disclose this crap anyway. So this is kind of like the private deed transfer. And so if you're a real estate investor, you do this every month, every year. You're buying property, putting it into your LLC. Yeah, that's okay, but now the government wants to know what the hell's going on.

Three Common Scenarios Explained

SPEAKER_01

Yeah. And let me just say two other examples that might be hitting. Okay, that's number one. Yeah, that was number one. Let's say you're buying a property using subject to creative financing, and you're buying it right in the LLC from the get-go. All right, residential real estate, no bank or mortgage company involved in lending you or the LLC money, and the property ended up in an LLC. That's going to trigger it. One more that's happening. Cash buyers. 40% of real estate transactions now are entirely cash. You're buying property directly in an LLC, residential real estate, no bank or mortgage lender involved, title ends up in an LLC. Now you got to do this real estate report.

SPEAKER_00

Okay.

SPEAKER_01

Now, that could have been a lot.

SPEAKER_00

Let's take a break. We come in hot. We come in hot. Is again. If you're buying commercial property, if you're buying your own home or property and there's a bank lending money and you're buying it from someone, blah, blah, blah. That does not, this law does not apply. Again, it's when you're transferring real estate you already own to an LLC. You're buying someone's property, but you're not using the bank. You're kind of assuming their loan and it's going to go in your LLC. Or third, what was third? Oh, I forgot all of a sudden. Cash buyer. Yeah, cash buyer. You're going to buy property right in the LLC from the beginning. Well, I got thrown off because I'm already thinking to the next major point. Is does this matter? What am I having to disclose? What, why is the sky falling, guys? Well, it may not be a big deal for you, but it is for some that the government just wants to know who the hell owns this LLC. They're worried about bad actors, money launderers, whoever, trying to hide money in real estate. And then we're like, no, we need to know who's behind this LLC. And that's kind of like back to the BOI that we talked about like crazy last year. Is the government wanted to know who's behind any LLC? Well, this is kind of a little end around for LLCs that own real estate. This law has a lot more support in government to say, no, no, no, no. Every LLC, we may not need to know that. They backed off. Law was retracted. But this one, when it comes to real estate, they want to know who owns these LLCs. So what's this report? Yeah.

What You Must Disclose To FinCEN

SPEAKER_01

It's called the Real Estate Report, and it's got about four or five sections to it. The first section is give us the info on the property. What property are we talking about? It's the property at 123 Green Street. Here's the legal description. Basically the info on the freaking deed. Second, they want to know who received this property. What is the LLC that received this property? So you have to disclose that. This is XYZ Realty Holdings LLC. All right. You disclose the address of it, the EIN of that LLC. And the big part that Mark mentioned, anyone who owns 25% or more or who has control of the LLC. Their personal information is going to be on this real estate report going to the federal government saying, I'm someone that's a beneficial owner or has control of this LLC. Now you do not have to upload an ID. This was something that was with a BOI thing that luckily got Trump administration as canned. But you do have to disclose your name, date of birth, address, and social security number.

SPEAKER_00

Yeah. Now that is this report that will go to the federal government. It's not going to be public record. Now, for some people, again, that doesn't make them feel any better. But the government and their anti-laundering initiatives, FinCEN, the federal, what how you what is it?

SPEAKER_01

Financial, Financial Enforcement, Financial Criminal Enforcement Network.

Who Can Access The Data

SPEAKER_00

There we go. Is basically been charged by the executive branch of the government to go after bad actors. They need this information. It's a mystery. And Iowans are like sick of it. They're like, we don't even know who owns the land down the street anymore. It's all hidden behind these LLCs. And they are trying to pass laws in Iowa to get more disclosure. Now, anyway, some of you are like, I like that. I don't want to tell them to mind their own business. Well, they're trying to find bad guys, you know. But anyway, but some of you are like, hell, that's maybe fine in Iowa, but not where my property is, you know, is at. So you may say, I want to not report this when I transfer my property to my LLC. I don't want the government knowing any more than they already know about me. And heaven forbid, some of you already believe, eh, it's a slippery slope, tell it'll be on Google. And then I don't want that either. So what do you do to get around this? Well, let's talk about what other transactions don't apply. And I think the trust issue needs to be come up next.

SPEAKER_01

Yeah, there's an exception to this. There's a number of exceptions, but the primary one that we see is going to be useful to clients is the trust exception. So there's an exception that says, hey, if the property is deeded to a trust and the settler or the person establishing the trust is the same person that is deeding the property into the trust, the real estate report is not required. Now, this is for let's think of just like your estate plan, your revocable living trust. And we set up an estate plan for you and your revocable living trust. Every American should have that. We're gonna deed the property out of your personal name into your trust. All right. Now that that is gonna be exempt. No need to do a real estate report on that. Fin Send's like, we don't care about that, we don't need to know that. But the exception might be a little broader than that, too.

Trust Exception And Limits

SPEAKER_00

Yeah. And this trust strategy gets to be where all the the strategy can play out. Because you may say, I've got a rental property and I want that LLC owned by my trust. So if I'm transferring to an LLC owned by my trust, well, isn't that an exception? No, because the initial transfers to the LLC. Now, in your trifecta, if you set one up at our office and we're trying to bring together your overall tax and asset protection and privacy plan, your trust is going to be the foundation of everything. But because it owns the LLC and you're transferring to an LLC and it's a rental property, then you're gonna have to go through this disclosure. So workarounds. This is where it's gonna be very dependent on your situation, how much you really want to spend, um, what you feel the risks are. And at our law firm, we have a asset protection and privacy consultation. We build you a trifecta, we build you a pitcher, and we also go through and identify what's out there on public record. Your home address is everywhere. You should not be your own registered agent. Your home address is out here on this LLC. By the way, this trust, you're the trustee on that, and that's cool. But you know, just moving it to the trust doesn't mean people can't see your name. And all of a sudden, people realize, man, my name's out there. So this privacy consultation is step one. Let's just see what exposure I have with my privacy, and I need to get this to an LLC. What are my options to maybe hide my name and avoid at the same time this report?

Building A Practical Privacy Plan

SPEAKER_01

Yeah. And so this will, like Mark said, this could depend on your state and implementing a trust that maybe the LLC is the beneficiary of. It depends on where this is viable in different states. So we want to make sure you're talking to an actual lawyer on this, not someone who pretends to be a lawyer, but like a real lawyer, which is what we have at our law firm. I just want to but so many people come to us and they're like, Well, I was working with so-and-so and they told me to do this. And we're like, who the hell are they? Are they a lawyer? No. Why are you taking legal advice from them? I mean, I don't go to the doctor and be like, yeah, my buddy at the, you know, he said I should take this and you know that, you know, like get some good advice from someone who's gonna actually stand behind it and has malpractice insurance. Now, I'll say one other thing is on that privacy thing, um, this because this is a big concern with BOI too, is it is when you file this real estate report, it is confidential. It's like your tax return. It can't be disclosed. Now, mind you, Trump, Jeff Bezos, Warren Buffett all got their tax returns, you know, you know. They ran for office. So that guy that did that went to prison, okay? Yeah. That guy he went to prison for that. Okay. So, so this is supposed to be protected. They can't make a Freedom of Information Act request to get the ownership of the LLC. Even other government agencies don't have access to this. They have to have a subpoena to get access to this from Vincent. So, um, so it's not gonna be publicly searchable or a database out there. Um, but still, it sucks to have to send it um to the federal government. Now, I'll say this when we're doing LLCs now, we're setting up, like I said, we're setting a lot of LLCs and a lot of D transfers going to LLCs with our clients. We're doing this for you. We are gonna complete this real estate report for you if you want us to, and you need to do this to comply. There's penalties and criminal fines and possible jail time if you don't. So we want to make sure you're staying in compliance with the law. So we will handle this for you.

Firm Services And Compliance

SPEAKER_00

Yeah, yeah. And oh my gosh, I'm gonna give you a sweet workaround, but I do want to hit this point with saying it another way. We are still setting up LLCs for rental properties. And you still. If you own rental property in your home state, across the country, wherever it is, you don't need your name on it, you don't need your home address out there, and you certainly don't want to own it personally or in your trust directly, because if that tenant falls down the stairs or there's a lawsuit with a vendor, a contractor, whatever, you're personally liable. We all know if you're a real estate investor, you already know the benefits of the LLC. Still keep doing that. And when you transfer that property to the LLC and you're like, ah, guys, I'll hear the workaround, but I'm still gonna transfer it to the LC. For we do those deeds. We do them all every day. We're gonna charge$50 more. We're gonna take care of it. It's done right. And so this is making it a little easier at our office for us because sometimes clients go out to a title company and have them do it and they screw it up or they try to do it on their own. There's 3,500 country uh counties in the state, and they all have a kind of a different way of recording warranty deeds or grant deeds, or what form do you attach to the deed and how is it recorded? Is it online? Do you mail it in? Whatever. Our team of paralegals know how to transfer that deed. We know how to do this report, and we will take care of it. So when you set up an LLC with us, you know it's gonna be affordable. First of all, our LLC is around$1,500, or we see competitors that aren't even a lawyer charging three grand. So be careful there. We're gonna be affordable on the LLC, we're gonna transfer the deed and transfer and cost charge$50 more to make sure it's done right.

SPEAKER_01

Yeah. Okay. Okay. Well, did you want to get into any of the workarounds more? Then like get some consult, and it depends by based on the 50 states. I mean, this is where this law, and there's it's interesting. The uh FinCEN has a set of FAQs on their website. I've been back to those FAQs three times, and they have changed every time I have gone to, or they're adding more question and answer about what's a viable strategy, what's an exception, what's not. This trust one is one of the things that's that there's been a lot of questions about, and how do I can I use that in connection with my LLC to maybe get around this? So we'll be updating you on this. The reason I say that is like this law's new, it's there's lawsuits going on about this right now. Now they've all lost. This is BOI, they were starting to win all the cases. All lawsuits they've lost, but you're gonna start finding this is gonna get refined here as we go. And we'll be, of course, updating you and making sure you're complying, or you know, the best strategy to get around it if you can.

The Wyoming LLC And Strategy

SPEAKER_00

Yeah, and I and I want to give you, if I may, I want to give you the general workaround that we're developing and using. And uh the nice thing is when you work with a lawyer too, we stand behind it and make sure it's vetted and proper in your state and in your situation. But the general workaround you're gonna hear about out there is okay, I don't want to transfer directly directly to the LLC because I'm gonna have to do this report. So, and I'd like some more privacy anyway, and I'd like maybe a little better asset protection. This is actually giving me the impetus I needed to kind of get my crap together. And we've had a lot of clients say that, you know, you know what, I it's time to clean house anyway. So, what's going to be a typical workaround is we're gonna set up a trust, not your revocable living trust, that is the foundation of your estate plan, but a trust that's specific to this uh holding of the property. It might be called a privacy trust, it might be called a land trust, just a basic grantor trust. Depending on certain states, you got to call it different things. And some states have laws for this, some don't, and they're silent. You have these kind of common law trusts, they can be very affordable. A basic trust will be set up specifically for that property. And you're gonna now that trust, you're gonna be the grantor of it, you're gonna set up that trust. We set up the paperwork, and then the owner of that trust or beneficiary is gonna be where the LLC lives. And that LLC is what's giving you that asset protection. The trustee of that trust might be a Wyoming LLC. We might want a separate LLC or maybe the same LLC to be the trustee and the beneficiary. It's gonna depend again on your situation and what works best for you, how much property you have anyway. And so these Wyoming LLCs are fantastic for this because the Wyoming LLC, we don't have to disclose you as an owner or a manager. We as the law firm are the organizer of that LLC. And we do these every day. So now you have a Wyoming LLC done affordably, by the way, for you to maybe serve as the owner or beneficiary of the trust, maybe the trustee. And then when you transfer to that trust, you're exempt from doing this reporting. And at the end of the day, you've got better privacy, you still have an LLC, and everybody wins. And so that's the workaround that is uh gonna generally be used and tailored to your situation. So be careful getting this in a box because it's gonna be different for a lot of people.

Coordinating Entities With Estate Plan

SPEAKER_01

Yeah, and I'll say, like, um there's a lot of variability between the states on how this works. You know, Wyoming is a great LLC because of the privacy nature of it in the sense that your name doesn't need to be listed as an owner or manager or officer with the state. All right. We can just be listed as the organizer, it's pretty, and there's a couple other states like that, but Wyoming is mostly known as the best. So, but that and that saves me at the state level from privacy. But now we're layering on, I don't even want FinCEN to know who owns this thing. How do I get around that? Okay, now this is that trust structure strategy where we're adding LLCs. But let's say the property's in Texas, we might need a Texas LLC, the beneficiary of this. You know, so there's gonna be some layers to this, and there's a little more complexity here, but we're trying to illustrate you're working off two things here. How do we get privacy at the state level and just at the entity level, and also how to get privacy with the federal government and not having to do this fin sen report?

Closing Thoughts And Listener Actions

SPEAKER_00

Yeah, and it's it's also not breaking the bank and not making it overcomplex. We that's what we've been, and I'm gonna be a little blunt here too for everybody. Is that this is the battle we fight every day. We are so frustrated by times at times by people that are selling these LLCs in Wyoming for twice the price of a real law firm with a consultation with a real lawyer, and they're just better marketers or they create more fear, or they're a great crypto person or a great real estate influencer, and and because of their influencer status, they're able to say ours is more special. It's the same damn LLC, whether you call it a special privacy MX 2000, whatever, or whatever, you know, type of LLC. So be careful um getting package deals and expensive deals on these Wyoming LLCs and also making sure it's coordinated. That's the piece that we love to really provide here at the law firm is okay, in a vacuum, you could set up a Wyoming LLC. That's cool. Well, where does it go next? Do you have a bank account? Should you have a bank account? Are you doing your annual minutes? Are you make who's the owner of that LLC? Is your revocable living trust the owner? So it all flows down at the end of the day into your estate plan. I hope so. And what who's doing your annual report so that it doesn't get dissolved by the state automatically? All these little pieces and parts matter and it can be affordable and it can be simple, and hence the trifecta. So, anyway, I there's some workarounds. Don't stress if you want to go to that level.

SPEAKER_01

Yeah, I mean, that's what we're here for, and this is where we want to be part on your team, helping you navigate this stuff, taking it off your plate, letting you take more time to make money, spend with your family, grow and build your business. Let us take care of this tax and legal stuff. That's our role we can play, and we want to do it affordably and really truly add value.

SPEAKER_00

Yeah. Thanks for listening today to another episode of the Main Street Business Podcast. We are going to bring you more on this topic and other impactful topics to help you better live your American dream. Please share this, give it a five-star, a 10-star, two thumbs up, whatever. And we appreciate it. And we'll be back next week or sooner as we also reply to your questions on our Main Street Business Podcast website. You can submit questions for our open forum. We'd love to hear from you, and we'll see you on the next episode.

Head Shot

Mark J. Kohler

Host