Federal Court Halts Corporate Transparency Act Enforcement Nationwide

Federal Court Halts Corporate Transparency Act Enforcement Nationwide

by Uncategorized

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction halting the nationwide enforcement of the Corporate Transparency Act (CTA) and its related regulations. The court found that the CTA is likely unconstitutional, as it exceeds Congress’s authority. While this is not the first court to make such a ruling, the nationwide scope of the injunction—rather than applying only to the specific plaintiffs—marks an important development, especially as the compliance deadline for many businesses under the CTA is rapidly approaching.

What is The Corporate Transparency Act?

The Corporate Transparency Act (CTA), enacted in 2021 as part of the National Defense Authorization Act, mandates that reporting companies register with the U.S. Financial Crimes Enforcement Network (FinCEN) and disclose their ultimate beneficial owners—those natural persons who ultimately control or benefit from the company. The CTA aims to help fight money laundering, terrorism financing, tax fraud, and other criminal activities, while also trying to minimize the regulatory burden on businesses operating in the U.S.

FinCEN’s final rule implementing the CTA went into effect on January 1, 2024, and compliance began phasing in during 2024. Reporting companies formed or registered before this date are required to submit their initial reports by January 1, 2025.

Since its passage, the CTA has faced multiple legal challenges regarding its constitutionality. One significant case, NSBU v. Yellen, concluded in March 2024 when the U.S. District Court for the Northern District of Alabama ruled the CTA unconstitutional. The court found that the law exceeded Congress’s authority and issued a permanent injunction, barring its enforcement against the plaintiffs—a small business trade association, its members, and an individual. This decision is currently being appealed in the Eleventh Circuit.

Meanwhile, other district courts in Oregon and the Eastern District of Virginia have also considered the CTA’s constitutionality but determined that the plaintiffs in those cases did not show enough evidence to justify halting enforcement. As a result, those cases were denied a preliminary injunction. Both cases are now being appealed—one in the Ninth Circuit and the other in the Fourth Circuit. Additionally, a Massachusetts district court recently dismissed a challenge to the CTA after it was agreed that it did not apply to certain condo associations.

December 4, 2024 – A U.S. District Court ruling in the Eastern District of Texas has issued a nationwide injunction, blocking the enforcement of the Corporate Transparency Act (CTA). This decision halts the upcoming January 1, 2025, compliance deadline that would have required millions of businesses to disclose their beneficial ownership information (BOI) to a federal database managed by the Financial Crimes Enforcement Network (FinCEN).

The case, Top Cop Shop, Inc., et al. v. Garland, et al. (No. 4:24-cv-478), raised important constitutional issues regarding the CTA. The Court determined that the law oversteps Congress’s authority and violates constitutional rights.

Key Constitutional Issues Raised by the Court

1. Federal vs. State Power

The Court expressed concern that the CTA disrupts the balance of power between federal and state governments. Corporate governance has traditionally been regulated by the states, and the law’s federal oversight was viewed as an overreach.

2. Free Speech and Privacy Concerns

The Court also raised concerns about potential violations of First and Fourth Amendment rights. The CTA requires companies to disclose their beneficial ownership, which could infringe on rights related to free speech and privacy. The Court emphasized that forcing businesses to disclose this information could lead to government surveillance and unwanted exposure of personal or sensitive business details.

3. Financial Burden on Small Businesses

The Court addressed the significant costs the CTA imposes, estimating that the compliance bill could reach $22 billion in the first year. For small businesses, these costs were seen as an undue burden, further complicating the already challenging landscape of running a business.

Impact of the Ruling

Unlike other cases, such as National Small Business United v. Yellen (No. 5:22-cv-01448, N.D. Ala.), the ruling issued a nationwide injunction. This means that all businesses are temporarily relieved from the requirement to comply with the January 1, 2025, deadline.

For businesses that have already filed their beneficial ownership information with FinCEN, they are now able to pause their compliance efforts while they wait for further legal developments. This decision is a major win for small businesses, who were especially concerned about the costs and privacy risks associated with the CTA.

What’s Next for the Corporate Transparency Act?

While this ruling is a significant victory for opponents of the CTA, it is not the final word. The federal government is expected to appeal the decision, and the case could eventually reach the U.S. Supreme Court. A future presidential administration might also have an impact, potentially leading to changes in how the CTA is enforced.

The Court’s ruling highlights the ongoing debate over the balance between transparency and the protection of constitutional rights. As the legal process continues, businesses and legal professionals will need to stay updated on how these issues develop.

Lawyers with Purpose: Supporting Estate Planning Attorneys

At Lawyers with Purpose, we are committed to helping estate planning attorneys build businesses that are not only successful but also meaningful. We offer resources and support in areas like legal education, business operations, marketing, and community building.

If you want to stay informed about changes like the Corporate Transparency Act or need help with growing your law firm, reach out to us. Schedule a discovery call today, and let us help you handle the challenges your practice may face.

Estate Planning Essentials for Crypto Assets

Understanding Estate Planning Essentials for Crypto Assets

by Uncategorized

A recent survey found that 89% of cryptocurrency owners are concerned their families may struggle to identify and access these assets after their death. As estate planning attorneys, it’s important to understand how to effectively incorporate digital assets into your clients’ estate plans. 

Through insights from Brittney Shearin, ESQ., Head of Product & Legal Technical Attorney for LWP,  we will explore essential topics that can help attorneys confidently work this emerging area and better serve their clients who might want to include crypto assets in their wills or trust.

Here’s what you need to know about helping clients secure their financial legacies when it comes to cryptocurrency.

LWP Workflows, now named “FLOWS™

Introduction to the LWP Workflows, now named “FLOWS™” built within the Actionstep platform

by Uncategorized

At Lawyers With Purpose (LWP), we recognize that your law firm is more than just a practice; it’s a business. Without robust workflows, chaos can reign supreme. This is where LWP’s cloud-based systems come into play, allowing you to build a fail-safe practice that reduces mistakes, enhances efficiency, and frees up your valuable time. This enables you to focus on what truly matters: acquiring new clients and enjoying a fulfilling work-life balance.

This blog will explore how FLOWS™ within Actionstep can elevate your practice, leading to greater efficiency and client satisfaction.

Document Drafting for Estate Planning Attorneys

Top Tips for Document Drafting for Estate Planning Attorneys

by Uncategorized

Document drafting is the backbone of estate planning, translating your clients’ wishes into legally sound instruments that ensure their intentions are carried out to the letter. 

Whether you’re meticulously crafting each document by hand or leveraging the efficiency of automated software, the stakes are high—errors can lead to unintended consequences that may jeopardize an entire estate plan.

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You Bet Your VA Life Insurance!

by with No Comment Asset ProtectionLegal TechnicalSystems & ProcessesVA

Among the benefits that veterans may access through the U.S. Department of Veterans Affairs (VA) is life insurance. Considering the often-hazardous duty that veterans have encountered and survived, the VA’s life insurance programs are meant to offer a measure of financial security to the family for little or no cost. And proceeds from a life insurance policy on a veteran, no matter whether a VA policy or not, are not considered income by the VA, which can be a valuable benefit for a surviving spouse.

The various VA life insurance programs are listed below with the ubiquitous corresponding VA acronym.

  • Service members’ Group Life Insurance (SGLI)
    • Service members’ Group Life Insurance Traumatic Injury Protection (TSGLI)
    • Family Service members' Group Life Insurance (FSGLI)
    • Service members’ Group Life Insurance Disability Extension (SGLI-DE)
  • Service-Disabled Veterans’ Insurance (S-DVI)
  • Veterans’ Group Life Insurance (VGLI)
  • Veterans’ Mortgage Life Insurance (VMLI)

Bigstock-Soldier-And-Doctor-Shaking-Han-83552111As the names suggest, not all of these life insurance programs are meant for veterans. The only ones that are available to veterans are the last three. The first four programs are applicable to active service members or their dependents. Specifically, Service members' Group Life Insurance is term life insurance coverage for eligible service members that extends until 120 days after separation from service. Coverage under SGLI is $3.50/month for increments of $50,000 up to a maximum death benefit of $400,000 at a maximum monthly premium of $28.

Apart from basic SGLI, there are three versions of SGLI for specific circumstances. For an additional $1 premium per month, Service members'’ Group Life Insurance Traumatic Injury Protection (TSGLI) provides for a benefit paid in life if the service member suffers a loss due to traumatic injury like amputation, blindness, and paraplegia. There is also SGLI for dependents called Family Service members' Group Life Insurance (FSGLI). And the Service members' Group Life Insurance Disability Extension (SGLI-DE) is an extension of coverage for up to two years if the service member is totally disabled at separation.

After eligible active service, only veterans, and not their dependents, have VA life insurance options: the Service-Disabled Veterans’ Insurance (S-DVI), Veterans’ Group Life Insurance (VGLI), and the Veterans’ Mortgage Life Insurance (VMLI). Veterans who receive a new service-connected disability rating have two years to apply for Service-Disabled Veterans’ Insurance (S-DVI). A “new” service-connected disability rating does not include an increase of a previously held rating, nor a rating of Individual Unemployability, which is a special rating under which the VA can pay 100% of full disability compensation to someone whose service-connected disabilities are not rated at that level. Basic coverage under S-DVI, which offers both term and permanent type plans, starts at $10,000, and supplemental coverage can be purchased up to $30,000. If the new service-connected disability began before the age of 65 and lasted six consecutive months, the premiums for the first $10,000 in S-DVI coverage are waived.

For any service member who was covered by a SGLI policy during active duty and does not want to lose that coverage beyond the given 120 days after separation, there is the option of converting SGLI to a Veterans’ Group Life Insurance (VGLI) policy or even to a commercial policy. VGLI is a term life insurance product that provides lifetime coverage as long as the premiums are paid. Coverage can be the same amount as the original SGLI policy or can be reduced by increments of $10,000. Once enrolled, you can increase coverage by $25,000 every five years up to a maximum coverage of $400,000

The final insurance program available to veterans is Veterans’ Mortgage Life Insurance (VMLI), which is specifically for severely disabled veterans who have received a VA Specially Adapted Housing (SAH) grant to help build, remodel, or purchase a home, have the title to the home, and have a mortgage on the home. There is also an application deadline of age 70. A VMLI policy provides coverage equal to the amount of the mortgage still owed, up to $200,000, and is payable only to the mortgage holder. It is a decreasing term life insurance that reduces as the mortgage balance declines.

There is a convenient tool called Overview of VA Insurance Benefits created by the VA that allows you to pick the insurance program and then get further guidance on specific program eligibility. If a service member is qualified for SGLI, he or she, along with their non-service-member spouse, is automatically enrolled. To qualify, the applicant has to be an active-duty member of the Army, Navy, Air Force, Marines, or Coast Guard; a commissioned member of the National Oceanic and Atmospheric Administration or the U.S. Public Health Service; a cadet or midshipman of the U.S. military academies or the Reserve Officers Training Corps (ROTC) engaged in authorized training and practice cruises; or certain reserve members.

Veterans, on the other hand, must complete applications for VA life insurance products. Complete and file form VA Form 29-4364 for Service-Disabled Veterans’ Insurance (S-DVI) or apply online at https://www.insurance.va.gov/portal/. Veterans’ Group Life Insurance (VGLI) requires completion of VA form SGLV 8714 or an online application at the Prudential website: https://giosgli.prudential.com/osgli/web/OSGLIMenu.html. Finally, one can only apply for Veterans’ Mortgage Life Insurance (VMLI) by completing VA form 29-8636.

If you would like to learn more about becoming a Lawyers With Purpose member consider joining us in the room the week of October 24th – October 28th in Houston for The Law Profit Summit and the Tri-Annual Practice Enhancement Retreat.  We promise it WILL change your practice!

By Sabrina A. Scott, Paralegal, The Elder & Disability Law Firm of Victoria L. Collier, PC, and Director of VA Services for Lawyers with Purpose.

Victoria L. Collier, Veteran of the United States Air Force, 1989-1995 and United States Army Reserves, 2001-2004. Victoria is a Certified Elder Law Attorney through the National Elder Law Foundation, Author of “47 Secret Veterans Benefits for Seniors”; Author of “Paying for Long Term Care: Financial Help for Wartime Veterans: The VA Aid & Attendance Benefit”; Founder of The Elder & Disability Law Firm of Victoria L. Collier, PC; Co-Founder of Lawyers with Purpose; and Co-Founder of Veterans Advocate Group of America.

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Does Your Trust Really Have Remarriage Protection?

by with One Comment Asset ProtectionDavid J. ZumpanoEstate Planning Drafting SoftwareLegal Technical

As a lawyer practicing in the elder law and estate planning industry for 25 years, I'm always intrigued by what lawyers refer to as remarriage protections. Remarriage protection relates to the provisions that one puts in a trust to ensure after a spouse dies and a surviving spouse remarries (or cohabitates) that the underlying estate plan of the deceased spouse is honored and maintained. The truth is that trust systems in the estate planning industry have little, if any, remarriage language or protections. The general protection that trust systems provide for remarriage is that if a spouse remarries, they allow you to discontinue payments of interest or principal to that spouse, and that's usually limited to the context in a family or marital trust. Wow, that's remarriage protection?


Bigstock-Broken-Wedding-Rings-19863971 (1)Hardly. In the Lawyers with Purpose Client Centered Software (LWP-CCS) system, there are layers of remarriage protections available to the client. First and foremost, the trust system tracks all of the benefits granted to a surviving spouse as you design the plan and import data into the trust system. Second, the trust system tracks all of the authority that you give a surviving spouse as trustee, trust protector, etc. Third, the LWP-CCS system allows you to identify what your client considers to be “remarriage.” In our default definition, the language identifies that a spouse will be deemed to be remarried after cohabiting for one night. The software also allows you to customize your own definition of remarriage, and once that definition is triggered you are then allowed to customize which of the powers or benefits that you have granted a surviving spouse will be modified or eliminated, along with any conditions for reinstatement.

For example, if a surviving spouse has been named trustee, the software knows that and asks you if you want to remove the right of the surviving spouse to be trustee upon marriage. Secondly, the trust software tracks all beneficial interests of the surviving spouse, and if you elect to have remarriage restrictions, the software will show you all the different places where the surviving spouse has retained a right to benefit from the trust. It will also ask if you want to minimize or eliminate any of those benefits individually, not collectively. That is, you can pick and choose which ones stay and which ones go.

Does this seem too good to be true? Well, it is if you have regular software, but the LWP-CCS software has been designed around the needs of the client, not the lawyers. The good news is, once you identify the needs of the client, the software will put in the necessary legal language to accomplish the objectives that you have identified for the clients. This is what being a Lawyer with Purpose means, and this is what client-centered software is all about. Don't go it alone. Let Lawyers with Purpose show you how to do real remarriage protection planning for clients.

If you aren't a Lawyers With Purpose member and are even thinking about adding estate or elder law to your existing practice, or want to make your estate/elder law practice more efficient, join us in the room in Houston this October 24th and 25th. Click here for the full agenda and to discover more of what you'll get from this program!

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

Gene-wilder

Honoring the Chocolate Factory by Protecting our Grantors During Life and After Death

by with One Comment Asset ProtectionSystems & Processes

Unknown to most of us, Gene Wilder suffered from Alzheimer’s disease during his final years. Mr. Wilder decided early in his diagnosis not to disclose his medical condition to the world. His family quietly dealt with the pain of caregiving and memory loss in a quiet and secluded way. After Mr. Wilder’s peaceful passing in his home, which came after a family chicken dinner while he listened to “Somewhere Over the Rainbow,” his nephew made an official statement about his death, and then the family went back to mourning the loss of a beloved member.

As an attorney, I immediately imagined what planning must have gone into this decision. I imagine the HIPAA forms that must have been signed to make sure the medical records of someone so famous stayed under wraps. Mr. Wilder must have had a strong personal care plan with wonderfully explicit direction to direct that, when he remembered nothing, his family should have his favorite meal and listen to his favorite song as he passed amid them all.


Gene-wilderBut mostly, I imagine the moment when it could have all gone wrong from a legal perspective. I imagine that moment when a doctor or lawyer told the family that Mr. Wilder could no longer make his own decisions. I wonder how that moment went, but I will never know. There were no court hearings about Mr. Wilder’s competence or who would control his fortune. There were no tabloid articles written. So, while we will never know what Mr. Wilder chose for us not to see, I do believe one thing to be certain. Gene Wilder must have had a strong trust plan in place, with dependable trustees, a solid disability panel and a watchful trust protector.

Often when creating trust plans, attorneys focus only on who will get property, at what time and in what manner. Certainly those are important prongs of a complete plan to focus on, but they are not the only issues. A solid client-centered plan will also focus on who will fulfill each crucial role of making sure the client’s plan is carried out when it is funded, after he becomes disabled and upon his death. A trustee or successor trustee should be selected with care and thought. And, by using age restrictions, powers of appointment and remarriage restrictions, a trustee can be guided in the exact direction the grantor intended for his estate plan.

A trust protector can be appointed to offer protection to the trust estate and the beneficiaries against any law changes, trustee vacancies and/or disputes that arise in the estate.  A trust protector’s ability to restate or amend a trust, appoint a trustee or settle a family dispute can eliminate the need for an expensive and public court hearing on a private family issue.  Trust protectors, usually attorneys, are the perfect parties to offer their clients the security of knowing that the plan they drafted has an outside eye ready to look over and protect the intent of the original plan.

Finally, I have no doubt that Mr. Wilder’s final years would not have been as private had he not had an excellent disability panel in place. A disability panel – a group of individuals hand-picked by the grantor who will decide when he is incapacitated for purposes of being trustee of his own estate – can make a determination of incompetence. By determining the incapacity of a grantor as a group, the disability panel can eliminate the need for a court hearing to declare the incapacity of a grantor. I cannot imagine the security a hand-selected disability panel must offer to people like Mr. Wilder who know that the day they need someone to take over is fast upon them and that it can be done with no court interference or adverse action by the family.

We are fortunate at Lawyers with Purpose to have client-centered drafting software that allows us to produce documents that take into account the need for disability panels, trust protectors and all of the other practice tools listed above that might be necessary to meet a client’s goals.      

I am positive that Mr. Wilder would be thankful for our ability to help clients through client-centered planning. I am certain of this because Mr. Wilder’s family spoke of why he made the decision to keep his prognosis and struggle private. He did so because he did not want the children of the world to see Willy Wonka as a sick, elderly man. I believe Willy Wonka himself best defined Mr. Wilder’s actions leading up to his death: “So shines a good deed in a weary world.”

If you want to learn more about becoming a Lawyer With Purpose, join us in Houston October 26-28 for the Tri-Annual Practice Enhancement Retreat. Click here to see the full agenda and reserve your seat now!

Kimberly M. Brannon, Esq., Legal-Technical and Software Trainer