Welcome to CPA at Law, helping individuals and small businesses plan for the future and keep what they have.

This is the personal blog of Sterling Olander, a Certified Public Accountant and Utah-licensed attorney. For over nine years, I have assisted clients with estate planning and administration, tax mitigation, tax controversies, small business planning, asset protection, and nonprofit law.

I write about any legal, tax, or technological information that I find interesting or useful in serving my clients. All ideas expressed herein are my own and don't constitute legal or tax advice.

Filing a BOIR Report for New LLC

The Corporate Transparency Act ("CTA") is now active law, and most new entities formed in 2024 must file a Beneficial Ownership Information Report ("BOIR") identifying their beneficial owners with the Financial Crimes Enforcement Network ("FinCEN") within 90 days of formation. Entities existing prior to 2024 have until the end of this year to file. For an introduction to the Corporate Transparency Act, see my prior post.

FinCEN provides detailed step-by-step instructions for filing a BOIR here, and this post will supplement those instructions. To file a BOIR, visit www.FinCEN.gov and click "File Your Report Now." This will take you to the E-Filing System through which the BOIR is filed. Bank Secrecy Act reporting is also mentioned on this page, but BOIR filing is commenced by clicking "Get Started" where BOIR is referenced. The next page provides two primary options, which are to file a PDF BOIR or an Online BOIR; this post will describe the online alternative.

After agreeing to only use the system for authorized purposes, select the "Type of filing," which for purposes of this post will be an "Initial report" for a newly-formed entity. No login or account is needed in order to file a BOIR. The process is straight-forward and involves simply selecting the correct options and entering the information, first about the reporting company itself and then the applicant(s) and beneficial owner(s).

The next screen asks and then confirms whether the entity is an existing reporting company, meaning one that was already in existence as of January 1, 2024. Entities existing prior to 2024 need not report any company applicant information, but entities formed in 2024 need to provide company applicant information. Applicant information (name, birthdate, address, etc.) can either be provided directly, or if the applicant has previously obtained a FinCEN ID, the ID number can be entered instead. Requiring a FinCEN ID of company applicants and beneficial owners significantly simplifies initial reporting and the requirement to update reports if information about an applicant or owner changes.

After inputting information for all applicants, or their FinCEN IDs, the next page is where beneficial owner information (name, birthdate, address, etc.) is inputted. Note that a clear image of appropriate picture identification must be uploaded for both applicant(s) and beneficial owner(s) if a FinCEN ID is not provided. After the beneficial owner information is inputted, the final page is where certification of the information is provided and the report submitted.

The following page allows the filer to download the transcript of the BOIR, which is critical so that the data submitted can be kept on file by the company for when, among other things, information about the entity changes. Filing and updating BOIRs is an important new requirement for most U.S. entities.

Introduction to the Corporate Transparency Act

On January 1, 2024, the new federal Corporate Transparency Act will require the vast majority of small U.S. entities to start filing an online report with the Financial Crimes Enforcement Network (FinCEN) and report beneficial ownership. Existing entities will have until January 1, 2025 to file this report, but entities formed in the new year will need to file within 30 days of formation. Reports with FinCEN are already required for, among other things, foreign accounts, which I discussed in a previous post. However, the CTA is a big deal and represents a complete upheaval of current entity formation and maintenance practice. A number of exceptions to the reporting requirements apply, but generally only include large entities or entities that are otherwise subject to an existing regulatory regime, such as financial institutions. In other words, it is small entities that are being targeted by the CTA, and ultimate individual beneficial ownership is the primary reporting objective.

The reporting requirement is imposed upon the "reporting company" itself, which is any entity formed by filing a document with a state agency. This means that most trusts will not themselves be reporting companies but will likely have complex requirements to provide information about various trust participants if the trust owns a reporting company interest. "Senior officers" of a reporting company are liable for penalties of up to $500 for each day that the violation continues, imprisonment for up to two years, and/or a fine of up to $10,000. Beneficial owners of a reporting company that provide false information or refuse to provide information to the reporting company can also face penalties. A beneficial owner is any individual who exercises "substantial control" over a reporting company or owns or controls at least 25 percent of the ownership interests of the reporting company.

The key pieces of information required of beneficial owners include full legal name, date of birth, physical home address (P.O. Boxes are not allowed), and a copy of the individual's driver's license or passport. If any of this information changes, the reporting company must file a change report. Much of the burden of reporting and keeping track of a beneficial owner's change of information appears to be relieved in large part if the beneficial owner obtains his or her own FinCEN identification number and the reporting company reports that number. Given the detailed personal information that is required to be disclosed and the substantial penalties for noncompliance, we will be hearing much more about the CTA at the start of the new year.

Supported Decision Making Agreements

An emerging phrase in the estates and trusts world is that of "supported decision making." The concept of supported decision making is exactly as unremarkable as it sounds and is simply the idea of individuals looking to help from others in making a decision. Hiring a transactional attorney is to seek supported decision making, and many other professional advisors could also qualify as providing decision support.

However, when used in the context of helping individuals with disabilities, supported decision making represents a paradigm shift from protecting such individuals from poor decisions by inserting a surrogate decision maker to act for them to empowering such individuals to make their own decisions, with support from others. See Nina A. Kohn, Legislating Supported Decision-Making, 58 Harvard Journal on Legislation 313 (2021). Accordingly, one specific objective of supported decision making arrangements is to avoid the need for a guardianship.

Utah has introduced legislation specifying the requirements for supported decision making agreements, H.B. 510. Under the law, if passed, such an agreement must, among other things, be in writing, designate a "supporter," describe the principal's rights and how the principal uses supported decision-making to make decisions, define the responsibilities of each supporter, and be notarized. It must also "describe how any perceived or actual conflict of interest between a supporter and the principal will be mitigated."

Supported decision making agreements are nothing more than contracts that have been and will be executed whether or not H.B. 510 or comparable laws in other states are passed. However, the key benefit of H.B. 510 appears to be codifing what constitutes a supported decision making agreement and protecting third parties who rely in good faith on such agreements. It seems that there could be significant overlap in the utility and coverage of supported decision making agreements and limited powers of attorney, but supported decision making agreement legislation may fill coverage gaps and benefit individuals with disabilities.

Probate Code's One-Year Nonclaim Statute Protects Estates

In Utah, a creditor of an estate must present their claim within one year from the decedent's death or be forever barred. A court-appointed personal representative has the option, but not the obligation, to publish notice and give known creditors affirmative notice of the decedent's death and a shorter, three-month window to present claims. However, if no probate proceeding is commenced, the option for the three-month creditor window is not taken, and the one-year mark from the decedent's death is approaching, a creditor in Utah must file its own probate petition together with its claim.

Last year, the Utah Supreme Court clarified this statute in the case of Huitron v. Kaye, 517 P.3d 399 (2022), holding as follows:
[T]he Nonclaim Statute acts as a complete bar to claims against an estate that are not presented by the applicable deadline. This means that the presentment deadline is not waivable, and the one-year period cannot be tolled. And in an untimely suit against an estate for the sole purpose of collecting insurance proceeds, it means that the estate’s assets are not at risk as a matter of law. 517 P.3d at 404 (citations omitted).
This statute raises the possiblity that successors of a decedent may attempt to avoid payment of known claims by delaying administration until the one-year nonclaim period has run. However, the drafters of the Uniform Probate Code deemed this unlikely because:
[U]npaid creditors of a decedent are interested persons... qualified to force the opening of an estate for purposes of presenting and enforcing claims. Further, successors who delay opening an administration will suffer from lack of proof of title to estate assets and attendant inability to enjoy their inheritances. Finally, the odds that holders of important claims against the decedent will need help in learning of the death and proper place of administration is rather small.
Similar reasoning was used by the Colorado Supreme Court, interpreting another state's Uniform Probate Code nonclaim statute, in In the Matter of the Estate of Ongaro, 998 P.2d 1097 (2000). In that case, the court stated:
We are aware that the firm deadline for presenting claims... occasionally will work a hardship on claimants who do not receive actual notice of a decedent’s death. The General Assembly, however, has determined that the burden on those claimants is outweighed by the interest in the speedy and efficient settlement of estates.... A personal representative who decides not to provide known creditors with written notice of a decedent’s death and of the deadline for filing claims must forfeit the shorter nonclaim periods... in favor of the one-year period... 998 P.2d at 1104-1105.
In summary, the Uniform Probate Code balances the due process rights of creditors with the need for efficient administration of estates by including the one-year nonclaim statute. This limitations period cannot be tolled because "the personal representative is a trustee of the estate for the benefit of its creditors and heirs, and as such cannot by his conduct waive any provision of a statute affecting their substantial rights." Crowley v. Farmers Bank, 123 P.2d 407, 409 (1942). Anyone owed money or otherwise possessing a claim against an estate must make a formal claim against the estate in the manner prescribed by statute within one year of the decedent's death in order to protect their interests. 

Transfers Not Subject to Gift Tax

United States taxpayers pay an estate or gift tax on wealth transfers to the extent that the aggregate value of the transfers, whether upon death or during lifetime, exceeds $12,920,000 in 2023. On January 1, 2026, this exclusion amount is scheduled to be reduced roughly in half. Because of this, many taxpayers are considering utilizing this high capacity to give without taxes by utilizing their exclusion before it is reduced.

In general, any gratuitous transfer is reportable, and will reduce a taxpayer's capacity to transfer wealth without tax, but there are important exceptions. One important exception is the annual exclusion, which I discussed in a prior post, which currently allows each taxpayer to gift up to $17,000 per year per donee. This is perhaps the most widely known mechanism for transferring wealth without any gift or estate tax impact, but there are others as well.

Any taxpayer may make unlimited tuition payments on behalf of any individual without needing to report the gift, pay gift tax, or use their lifetime exclusion. Any such payments must be made directly to the educational institution. Similarly, any amounts may be paid to educational institutions for their general charitable purposes, just as any amounts may be paid to other charitable organizations free of gift or estate tax.

Any taxpayer may generally make payments directly to medical providers for medical payments or medical insurance premiums for others. Not only are such payments free from gift or estate tax, an income tax deduction may be available for the taxpayer, just as a charitable deduction may be available for gifts to charities for the benefit of the public. Finally, gifts to political organizations are generally exempt from gift tax. Using the tools described herein can be effective ways to mitigate gift and estate taxes.

Legal Pitfalls for Inexperienced Fiduciaries

As a simple local news search will reveal, criminal charges are regularly brought against fiduciaries who have allegedly breached their fiduciary duties. Criminal charges in the area of estate and trust administration could include unlawful dealing of property by a fiduciary and financial exploitation of a vulnerable adult.

The former is committed when a fiduciary "deals with property that has been entrusted to him as a fiduciary... in a manner which the person knows is a violation of the person's duty and which involves substantial risk of loss or detriment to the owner or to a person for whose benefit the property was entrusted." The latter is committed when anyone, among other things, "unjustly or improperly uses or manages the resources of a vulnerable adult for the profit or advantage of someone other than the vulnerable adult..."

There are obvious examples of cases where a fiduciary admits to using trust funds for personal use and criminal charges are warranted. However, it is not difficult to imagine a scenario where an inexperienced fiduciary has good intentions but doesn't keep a proper accounting or invests trust funds imprudently and a vindictive beneficiary seeks criminal charges.

An inexperienced trustee should clearly be held to account and restore, but there are civil remedies and civil damages available to beneficiaries that seem more appropriate as a first resort. Any fiduciary would be well-advised to seek legal counsel to avoid civil or criminal issues arising from their service.

Petition for Essential Treatment and Intervention

As I discussed in a prior post, completing a Declaration for Mental Health Treatment can be a useful way for someone with drug abuse or mental health challenges to provide for their own care if they reach a point where they can no longer care for themselves. If a Declaration is not completed, and the person becomes at risk of harming themselves or others, seeking an emergency guardianship from a court may be considered. Such motions can be ex-parte, meaning that no notice or hearing is required, and if granted, an emergency guardianship lasts for 30 days.

A third option, however, for cases of drug abuse, is known as a Petition for Essential Treatment and Intervention, which became available in 2017 pursuant to Utah Code 62A-15-1201. This law was passed to "address the serious public health crisis of substance use disorder related deaths". The proceeding commences in court when a "relative seeking essential treatment and intervention for a sufferer of a substance use disorder" files a petition with the district court where the sufferer lives.

The petition must identify a treatment facility where the sufferer may receive treatment and a binding commitment on the part of the petitioner to pay for treatment costs. Upon receiving the petition, the court will "set an expedited date for a time-sensitive hearing to determine whether the court should order the respondent to undergo essential treatment for a substance use disorder" and provide notice of the same to the interested parties. Unless the sufferer objects or the court orders otherwise, two essential treatment examiners will examine the sufferer before the hearing and make treatment recommendations to the court. If the court ultimately finds that treatment is required, it can order treatment and subject the sufferer to a warrant of commitment if they do not comply.

A Petition for Essential Treatment and Intervention is confidential, and the Utah Courts website provides all of the necessary forms for individuals who want to proceed without an attorney. While such a petition is not a panacea, it should at least be considered as an alternative to a guardianship.