A trust itself cannot be a beneficial owner, because a beneficial owner must be a person. However, if the trust owns at least 25% of a reporting company or has substantial control over a company, it must report its beneficial owner. As it applies to trusts, a beneficial owner is someone who benefits from the trust or can make decisions related to its assets.
In many cases, the trustee will be the beneficial owner under the CTA. The law considers a trustee to be a beneficial owner if they have substantial control over a reporting company. A trustee may also hold ownership interests in a reporting company through a trust. For example, if the trustee has the authority to dispose of trust assets or control the shares held by the trust, they will likely be a beneficial owner.
Besides trustees, the beneficiary, grantor, or settlor of a trust can also be a beneficial owner in some cases. Specifically, the law says a beneficial owner can be:
- A beneficiary who is the sole permissible recipient of income and principal from the trust.
- A beneficiary who has the right to demand a distribution or withdrawal of the trust assets.
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A grantor or settlor who has the right to revoke the trust or withdraw trust assets.
It’s important to know there may be multiple beneficial owners associated with a trust under the CTA. For example, a trustee, beneficiary, and grantor could all be beneficial owners of a trust. If you believe your trust may fall within the scope of the CTA, we strongly encourage you to work with an advisor who can review your trust and determine the beneficial owner(s) to ensure you comply fully with the law.
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Beneficial Owners & Trusts