In August 2024, the Financial Crimes Enforcement Network (“FinCEN”) issued a final rule designed to increase transparency in U.S. residential real estate transactions as part of broader anti-money laundering efforts. The rule became effective December 1, 2025. However, the reporting requirements, and associated penalties, apply to transfers occurring on or after March 1, 2026.
Codified at 31 C.F.R. § 1031.320, the rule establishes a federal filing obligation for certain non-financed residential real estate transfers involving entities and trusts. Although aimed at deterring illicit financial activity, the rule will affect many routine estate planning, business structuring, and gifting transactions.
A Real Estate Report must be filed when all four of the following conditions are met:
If any element is missing, the reporting requirement does not arise.
The rule applies to property located in the United States that includes:
There is no minimum dollar threshold. Purchase price and fair market value are irrelevant. Gift transfers may therefore be subject to reporting.
The rule applies only to non-financed transfers. A transfer is considered financed, and therefore excluded, only if it involves an extension of credit secured by the transferred property and extended by a financial institution subject to Anti-Money Laundering program requirements and Suspicious Activity Report obligations. If financing does not satisfy both requirements, the transaction may still be treated as nonfinanced and therefore reportable.
The reporting obligation applies only when residential property is transferred to a legal entity or trust. A transferee entity includes corporations, partnerships, LLCs, estates, associations, and similar organizations. Statutory trusts are treated as entities under the rule. A transferee trust includes traditional trust arrangements where a grantor places assets under the control of a trustee for beneficiaries, regardless of whether title is held in the name of the trust or the trustee. Transfers to individuals, standing alone, are not
reportable under this rule.
Only one person involved in the transaction must file the Real Estate Report. The rule establishes a default “reporting cascade”, which identifies the reporting person based on the function performed in the transaction. In most cases, the closing or settlement agent will be the reporting person. Alternatively, real estate professionals involved may enter into a written Designation Agreement assigning reporting responsibility to a specific individual. A separate agreement is required for each reportable transfer.
The Real Estate Report requires detailed information concerning the reporting person, the transferor, the transferee entity or trust, the residential property, total consideration and payment details, and the beneficial owners of the transferee entity or trust. For entities, beneficial owners generally include individuals who exercise substantial control or own or control at least 25% of ownership interests. For trusts, beneficial owners include trustees, certain beneficiaries with withdrawal rights, grantors with revocation authority, and individuals who otherwise control trust assets.
Reports must be filed by the later of the last day of the month following closing or thirty calendar days after closing. Reporting persons must retain beneficial ownership certifications and any designation agreements for five years. Failure to comply may result in civil monetary penalties for negligent violations and criminal penalties, including fines and imprisonment, for willful violations.
Certain transfers are exempt based on the nature of the transaction or identity of the transferee. Exempt transfers include those: (1) resulting from death, (2) incident to divorce, (3) supervised by a U.S. court, (4) made to a bankruptcy estate, (5) made for no consideration to certain revocable trusts, or (6) made to an intermediary in a § 1031 like-kind exchange. Transfers to certain regulated entities, including banks, governmental authorities, and specified financial institutions, are also exempt. Each transaction must be
analyzed carefully to determine whether an exemption applies.
This rule comes into play in routine transactions such as gifting residential property to an LLC, funding a family trust with residential real estate, or transferring property into a business entity. Although the filing obligation rests with the designated reporting person, clients should understand that beneficial ownership information will be collected and submitted to FinCEN. Evaluating reportability early, identifying the reporting person, confirming exemptions, and communicating with real estate professionals will be essential
as enforcement begins.
Mr. Abercrombie is a Partner in the Business Group of Semro Henry Ltd. To contact him please call (419) 517-7377 or email abercrombie@semrohenry.com
Mr. Abercrombie gratefully acknowledges the assistance of Lauren Wall, a
Third Year Law Student at the University of Toledo College of Law.