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Warner Norcross + Judd LLP is a corporate law firm with over 230 attorneys serving clients in nine offices throughout Michigan. Among the largest law firms in Michigan, Warner works in virtually all areas of business law.

Michigan Law Firm - Warner Norcross + Judd LLP

Beginning March 1, 2026, certain non-financed transfers of residential real estate to legal entities and trusts will trigger new federal reporting requirements. Federal authorities have long been concerned that bad actors use LLCs, trusts and other entities to disguise their identities when purchasing residential real estate. Transactions not involving financing institutions subject to certain reporting regulations are particularly attractive because they avoid scrutiny from lenders with anti-money laundering obligations. This rule is designed to address this gap. The first reporting deadline for transactions closing on or after March 1, 2026, will be April 30, 2026.

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When Does Reporting Apply?

A report must be filed when all four conditions are met:

First, the transaction involves residential real property — single-family homes, townhouses, condos, co-ops, structures designed for one to four families or vacant land intended for such use.

Second, the transfer is non-financed — meaning it does not involve credit secured by the property from a lender with anti-money laundering obligations. Transactions financed through banks, credit unions or mortgage companies are not reportable. Transactions financed through private lenders without such obligations are considered non-financed.

Third, the property is transferred to a legal entity or trust. Entities include corporations, partnerships, LLCs, estates and trusts — domestic or foreign. Trusts include express trusts, such as your traditional estate planning trusts, as well as constructive trusts or other trust-like arrangements. The rule excludes transfers directly to individuals from the reporting requirement.

Fourth, no exemption applies. The eight exemptions include death-related transfers (via will, trust, intestate succession, survivorship, TOD deeds or beneficiary designations); transfers incident to divorce or dissolution; court-supervised transfers; transfers to a bankruptcy estate; easements; estate planning transfers (no-consideration transfers by an individual to a trust where that individual is the grantor); and transfers to a qualified intermediary for Section 1031 exchanges. Transfers to highly regulated entities (banks, credit unions, registered investment companies, insurance companies, publicly traded companies and their subsidiaries) are also exempt.

Importantly, there is no dollar threshold — both low-value and high-value transactions are reportable, and even gifts may be covered.

Examples: Reporting Required vs. Not Required

Reporting IS required when, for example, an investor uses personal funds to purchase a single-family rental property through a newly formed LLC; a family trust purchases a condominium with cash; an entity or trust purchases a townhouse using financing from a private lender without anti-money laundering obligations; or a self-directed IRA purchases residential property.

Reporting is NOT required when, for example, an individual purchases a home in their own name (no entity involved); an LLC purchases a home using a mortgage from a bank or credit union; a parent transfers a vacation home to a revocable trust for which the parent is the grantor, for no consideration; property passes to a family trust upon the owner's death; or a married couple transfers their home to an LLC as part of a divorce settlement.

Who Must File the Report?

The "reporting person" is typically a professional involved in the closing. FinCEN uses a "cascade" to determine responsibility based on the functions performed in the transaction (e.g., preparing the settlement statement, filing the deed and underwriting title insurance). In most cases, a title company will be the reporting person, but attorneys may also be responsible depending on their role. A written "designation agreement" may assign responsibility to another cascade participant.

The report requires detailed information about the transaction (including the source of funds for the purchase), the parties and — most importantly — the beneficial owners of the transferee entity or trust. Information requested includes, among others, name, address and tax identification number. The reporting person may reasonably rely on a certification from the transferee to gather this information.

Reports must be filed electronically through FinCEN's BSA E-Filing System. The deadline is the later of 30 days after closing or the last day of the following month. "Closing" typically means the date of signing, not recording. The first reports (for transactions closing March 1, 2026, or later) will be due no earlier than April 30, 2026. Reporting persons must retain records — including beneficial ownership certifications and designation agreements — for five years.

Penalties for Non-Compliance

Non-compliance carries significant civil and criminal penalties, including fines exceeding $250,000 and up to five years imprisonment for willful violations. FinCEN does not permit incomplete reports; if the required information cannot be obtained, the reporting person should decline to serve in a capacity that would trigger the obligation.

If you are planning a non-financed purchase through an LLC, trust or other entity, be prepared to provide detailed beneficial ownership information to the professionals handling your closing. If you facilitate real estate closings, consult compliance advisors to determine your obligations.

If you have questions about these new reporting requirements or how they may affect your transactions, please contact Rachel Foster, Sara Nicholson or your Warner attorney.

Legacy Matters

Private Client and Family Office

Partner

Rachel J. Foster

Sara A. Nicholson

Associate

Caryn Hannapel

New FinCEN Reporting Requirements for Residential Real Estate Transactions Take Effect March 1, 2026

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