What is the Corporate Transparency Act?

On September 29, 2022, the US Treasury Department Financial Crimes Enforcement Network, “FinCEN”, issued its final rule implementing requirements to report beneficial ownership information from certain entities under the Corporate Transparency Act.  The goal of this legislation is to fight the financing of terrorism and money laundering.  The rule takes effect on January 1, 2024.  Any “reporting company” existing or registered before then must file an initial report by January 1, 2025.  Any reporting company created or registered after January 1, 2024 must file its initial report within 30 days after creation or registration. 

What is to be reported? FinCEN is in the process of creating forms for this and will publish such in the Federal Register.  Failure to comply with the reporting requirements can lead to civil and criminal penalties including a maximum civil penalty of $500 per day, up to $10,000, and imprisonment for up to two years.

Who must report? Domestic companies including smaller corporations, limited liability companies, limited liability partnerships, limited liability limited partnerships, business trusts (statutory trusts or Massachusetts business trusts) and limited partnerships.  For example, if you have an LLC that owns a rental property, the LLC is a reporting company.  Foreign companies operating in the USA under the law of a foreign country and registered to do business in any state or tribal jurisdiction, or any entity created by filing a document with a secretary of state or similar state or tribal office, are also included.  

There are 23 categories of entities exempt from reporting.  It appears that most estate planning trusts will not have to report to FinCEN.  To be a reporting company the trust would have to file a registration document with a secretary of state or similar state or tribal office; most revocable and irrevocable trusts do not do this.  Charitable trusts are specifically exempt from reporting.

Even though most trusts will not qualify as reporting companies, the law impacts any entity with an ownership interest in a U.S. company, including foreign trusts.  Reporting companies must report to FinCEN each owner that owns more than 25% of the company, including trusts, regardless of where the trust is domiciled and whether it is registered with any secretary of state. 

New Law in Arizona – 2023

With a new year comes new laws and regulations in states and cities across the country. Nearly half of all U.S. states will increase their minimum wages in 2023, including Arizona.  The new minimum wage will increase from $12.80 per hour to $13.85.  Flagstaff’s minimum wage will be $16.80 per hour.

A new Arizona law on sealing criminal records may help some renters, but there are limitations. This law is the third effort by Arizona to give people with criminal records a second chance.  Arizonans with criminal backgrounds now have an opportunity to shield their records from public view, which can help benefit public housing assistance.

As part of the Inflation Reduction Act, the price of insulin for Medicare beneficiaries will be capped at $35 per month. 

Changes to the tax credits for those purchasing used electric vehicles means buyers can receive up to $4,000 in credits but it may not exceed 30% of the vehicle’s sale price. According to the IRS, you may qualify for a credit up to $7,500 under Internal Revenue Code Section 30D if you buy a new, qualified plug-in EV or fuel cell electric vehicle (FCV). The Inflation Reduction Act of 2022 changed the rules for this credit for vehicles purchased from 2023 to 2032.

In the realm of health care, the power of attorney appointing a party to act as your agent comes with a new wrinkle.  Your agent will be subject to visitation/contact law found at A.R.S. § 36-3211, wherein contacts between you as the principal and those with whom you have a significant relationship are encouraged and allowed, and your agent cannot limit, restrict or prohibit reasonable contact between you and any other person without prior court approval. 

What is the reason for this?  Notorious cases such as that of Casey Kasem – where the party (wife) denied family members (children from another marriage) contact or visiting with Casey resulting in litigation.  However, the power of attorney form may provide that you, as the principal, may grant to your agent the power to limit contacts or visits between you and others, if you wish.

Asset Protection in Arizona

Arizona allows various exemptions, protected by Arizona law, from most or all creditors after a judgment or bankruptcy filing.  These exemptions are different from corporate or limited liability company protection from creditors after a judgment or bankruptcy filing.

Some exemptions under Arizona law are:

  • Homestead Exemption – Up to $250,000 of equity in a primary residence either by a single person or a married couple – not $250,000 each if married. The exemption is automatic.
  • Household Goods – Household goods up to $6,000 in value.  This includes furniture and furnishings, appliances, and personal items.   
  • Personal Property – $300 cash, clothing up to $500, musical instruments up to $400, pets, a wedding ring up to $2,000, books up to $250, a bicycle, a firearm or a computer, all up to $1,000 each, a car up to $6,000 and a wheelchair.  Also an exemption of up to $5,000 for tools of the trade.           

Life Insurance

What about life insurance? Yes, as long as it is a whole life policy.  During the policy owner’s life the cash value of the insurance policy is fully protected after the policy has been in force for two years.  A.R.S. 33-1126(A) (6).  The policy must name a surviving spouse, child, parent, brother or sister, or any other dependent family member as beneficiary.  The death benefit is also fully protected from the insured’s creditors in Arizona.  A.R.S. 20-1131(A).  But, if the estate of the insured is insolvent, the surviving spouse and children are given up to $20,000 of claim-free insurance proceeds only.  A.R.S. 33-1126(A)(1).    

Annuity contracts are treated much the same way as life insurance. 

IRA and Deferred Compensation Accounts

Federal law protects the assets in a qualified retirement plan.  This includes all 401(k), 403(b), and TSA accounts.  Arizona law also protects assets in an Individual Retirement Arrangement (“IRA”) by statute.  A.R.S. 33-1126(B)  Since this is the case, putting an IRA into a trust is unnecessary if the objective is to protect the IRA from creditors. 
Under Arizona law, an inherited IRA has additional protection in the context of bankruptcy court.  Under various cases in Arizona and the US Supreme Court, (In re Thiem, Bktcy Ct AZ 1/19/2011, 107 AFTR 2d 2011-529), partly overruled in Clark v. Rameker (June 12, 2014), an Arizona statute appears to protect an Arizona resident’s inherited IRA assets from bankruptcy creditors.  Only Arizona, Alaska, Florida, Idaho, Missouri, Ohio, North Carolina, and Texas offer this extended protection.

Is Your Will Valid Under Arizona Law?

Recently, the law has changed in Arizona as to the validity of a Will. Arizona also allows electronic Wills under certain circumstances.  

For any Will executed on or after October 1, 2019, unless it is self-proved as prescribed in Arizona Revised Statutes Section 14-2504 or 14-2519, a person may not act as a witness to a Will if that person is a devisee under that Will or is related by blood, marriage or adoption to a devisee under that Will.  “Devisee” means a person who is designated in the Will to receive a devise (distribution) or who is a beneficiary of a trust that is designated in the Will to receive a devise.

A Will is self-proved if both the will maker and the witnesses have signed after proper attestations — dictated by statute — and had their signatures notarized. 

Arizona requires two witnesses.  Who is competent to be a witness? ARS Section 14-2505 says that a person who is generally competent to be a witness may act as a witness to a will.  Who is that?  A person at least 18 years of age and of sound mind is competent to be a witness.  

As to Electronic Wills:

In addition to the requirements of section 14-2504, to be self-proved, an electronic Will must meet all the following requirements:

1. Contain the electronic signature and electronic seal of a notary public placed on the Will in accordance with applicable law.  

2. Designate a qualified custodian to maintain custody of the electronic will.

3. Before being offered for probate or being reduced to a certified paper original, be under the exclusive control of a qualified custodian at all times.

Also, the journal to record the notary act must be in a tamper-evident electronic journal; no recording in a paper journal.  The electronic journal and the audio-visual recording are public records upon proper request to the notary.


Arizona is a community property state so property acquired by a married couple is presumed to be community property unless legally specified otherwise. Title may be held as “sole and separate.” If a married person acquires title as sole and separate, his or her spouse must execute a disclaimer deed to avoid the presumption of community property. Parties may choose to hold title in the name of an entity, such as a corporation; limited liability company; a partnership, or a trust. Following are the most common examples of holding title.  How title is held has significant consequences so please consult a professional for further information.


Requires a valid marriage between two persons.

Each spouse holds an undivided one-half interest in the estate.

One spouse cannot partition (divide) the property by selling his or her interest.

Requires signatures of both spouses to convey or encumber.

Each spouse can devise (will) one-half of the community property.

Upon death the estate of the decedent must go through probate, affidavit or adjudication.

Both halves of the community property are entitled to a “stepped up”* tax basis as of the date of death.


Parties need not be married; may be many joint tenants.

Each joint tenant holds an equal and undivided interest in the estate, unity of interest.

One joint tenant can partition (divide) the property by selling his or her interest.

Requires signatures of all joint tenants to convey or encumber the whole.

Estate passes to surviving joint tenants outside of probate.

No court action required to clear title upon the death of joint tenant(s).

Deceased tenant’s share is entitled to a “stepped up”* tax basis as of the date of death.


Requires a valid marriage between two persons.

Each spouse holds an undivided one-half interest in the estate.

One spouse cannot partition (divide) the property by selling his or her interest.

Requires signatures of both spouses to convey or encumber.

Estate passes to the surviving spouse outside of probate.

No court action required to clear title upon the first death.

Both halves of the community property are entitled to a “stepped up”* tax basis.


Parties need not be married; may be many tenants in common.

Each tenant in common holds an undivided fractional interest in the estate. Can be disproportionate, such as 20% and 80%; 60% and 40%; etc.

Each tenant’s share can be conveyed, encumbered (mortgaged) or devised (willed) to a third party.

Requires signatures of all tenants to convey or encumber the whole.

Upon death the tenant’s proportionate share passes to his or her heirs by will, trust or intestacy.

Upon death the decedent’s share must go through probate, affidavit or adjudication.

Each share has its own tax basis.

*Stepped up tax basis. Under this rule, an heir receives a basis in inherited property equal to its date-of-death value. If your uncle bought XYZ stock in 1940 for $500 and it’s worth $5 million at his death, the basis is stepped up to $5 million in the hands of his heirs and all of that gain escapes federal income tax forever.

This rule applies to inherited property that’s includible in the deceased’s gross estate and to property inherited from foreign persons who aren’t subject to U.S. estate tax. It also applies to the inherited portion of property owned by an inheriting taxpayer jointly with the deceased, but not the portion of jointly held property that the inheriting taxpayer owned before inheritance. This rule does not apply to reinvestments of estate assets by fiduciaries.


Under Arizona law, there is a statute (law) that deals with the problem of a missing beneficiary. Arizona Revised Statute §14-3914 states what is to be done if an heir, a beneficiary where there is no Will, or a devisee, a beneficiary where there is a Will, cannot be found. 

What does this statute say? If such a person cannot be found, the personal representative (executor) of the estate can distribute the share of the missing person to his or her conservator, if there is one.  Otherwise, the cash must be deposited to the Arizona Department of Revenue into the permanent school fund.  In short, the government gets it. 

If a person later appears and claims to be the missing heir or devisee, that person  makes a claim to the escheated property.  “Escheated” is the legal term for reversion of property to the state or some agency of the state.  

If the person shows up within seven (7) years, the person files a claim to the money with the Arizona Department of Revenue.  Thereafter, the department can hold a hearing and “receive evidence,” if they like.  If there is a hearing, the department issues a decision which is in the public record.  If the claim is granted, the department issues payment immediately.  If the claim is denied, the aggrieved party can then file an action in Superior Court to adjudicate the claim in court.


New laws taking effect on January 1, 2022 include an increase in minimum wage, a change in income taxes and the chance for some adopted Arizonans to access their birth certificates. 

Minimum wage increase

The state minimum wage will increase from $12.15 per hour to $12.80 per hour on January 1. Voters initially approved a yearly minimum wage increase in 2016, with the increases to be based on cost-of-living after minimum wage reached $12 per hour in 2020. The minimum wage in Arizona in 2016 was $8.05 per hour. 

Income tax

Arizona’s four tax brackets will be replaced by two.  The tax rates for single people and married people filing separately will be 2.55 percent for those making $27,272 and less. The tax rate will be 2.98 percent for single filers making more than $27,272 and joint filers with incomes over $54,544. 

Arizona’s previous rates ranged from 2.59 percent for single filers with income up to $26,500 to 4.5 percent for single filers with income more than $159,000, with monetary thresholds doubled for those filing jointly. 

Birth certificates for adoptees

Anyone born on or before June 20, 1968 andadopted in Arizona can access their original birth certificate upon request.  For those born after that date, the release of an Arizona birth certificate requires a court order — as was the case for all Arizona adoptees prior to Jan. 1. 

Homestead exemption increase

Arizona’s homestead exemption will increase from $150,000 to $250,000. This means that homeowners can protect more of the equity in their homes when in bankruptcy. However, while judgement liens previously did not apply to homestead property, as of the start of 2022, now they do. This means that homeowners would not have access to homestead equity until they pay those lien holders. 

2022 Estate & Gift Tax – Federal & Arizona

The federal estate and gift tax exemption rises to $12 million per individual for 2022 deaths, up from $11.7 million in 2021, according to Internal Revenue Service.  The gift tax annual exclusion will be $16,000 for 2022, up from $15,000. The new numbers mean that wealthy taxpayers can transfer more to their heirs tax free during life or at death. 

In 2022, an individual can leave $12 million to heirs and pay no federal estate or gift tax, while a married couple is exempt up to $24 million.  In 2025 this is scheduled to reduce to $5 million but is indexed to inflation, so the number will probably be $6.5 million or more — if Congress does nothing to change this.  Keep in mind that Arizona has no estate tax and no gift tax.

Someone can give away $16,000 to as many individuals—kids, grandkids, their friends or spouses—as that person would like with no federal gift tax consequences.  Spouses can each make $16,000 gifts, doubling the impact.  A series of $16,000 annual exclusion gifts can add up, and they don’t count toward the $12 million exemption amount.  Please note that gifts made from one spouse to the other are gift tax-free under separate marital deduction rules.

Even gifts that aren’t covered by the exclusion and are therefore taxable may not result in a tax liability. This is because a tax credit wipes out the federal gift tax liability on the first taxable gifts that you make in your lifetime up to the estate tax exemption limit.  However, to the extent you use this credit against a gift tax liability, it reduces or eliminates the credit available for use against the federal estate tax at your death.

The Small Business Reorganization Act

The Small Business Reorganization Act became effective on February 19, 2020. The new law added Subchapter V to Chapter 11 of the Bankruptcy Code, allowing businesses to reorganize rather than liquidate. It streamlines the process for small businesses. Only individuals or entities engaged in commercial or business activities with non-contingent liquidated debts below $2.7 million, adjusted for inflation, may file under this code section. However, the CARES Act temporarily increased this amount to $7.5 million, but that expires on March 26, 2021. Only the debtor may file a plan in Subchapter V; consequently, there are no creditor competing plans. No financial documents need be filed.

The debtor must complete detailed schedules and a Statement of Financial Affairs to provide the court and creditors with information as to its assets, liabilities and financial condition. Additionally, 50% of the total debt must have arisen from the commercial or business activities of the debtor. The debtor remains in control of its business although it can be removed for cause. The trustee will then step in. A trustee is appointed in every case, but the trustee has limited powers.

Some of the more burdensome requirements of Chapter 11 are eliminated. The debtor is not required to pay fees to the United State Trustee. The debtor is not required to obtain or write a Disclosure Statement, unless ordered by the court. There are no Creditor’s Committees unless the court allows it. There is no requirement that at least one class of impaired creditors vote to accept the plan; only the debtor files a plan.

The administrative expenses must be paid as soon as the plan is confirmed. There is no absolute priority rule. Thus, equity owners may retain their interest in the company even if they do not pay creditors in full and do not provide any new value. Instead, the debtor projects its disposable income for a period of 3 to 5 years and this income must be paid to creditors. Provided the debtor can satisfy these requirements, reorganization under this new code section is preferable.

The SECURE ACT – now law

President Trump signed the SECURE Act as part of the government’s spending bill at the end of 2019 and it will inevitably affect most retirement savers, for better or worse.  Most of the bill takes effect in 2020.  The SECURE Act  — SECURE stands for “Setting Every Community Up for Retirement Enhancement” — puts into place numerous provisions intended to strengthen retirement security.  Here is a brief summary of the Act’s most important features: 

Annuities in 401(k) plans

The SECURE Act allows employers to offer annuities as investment options within 401(k) plans. Currently, employers hold the fiduciary responsibility to ensure these products are appropriate for employees’ portfolios, but under the new rules, the onus falls on insurance companies to offer proper investment choices. 

Increasing the required minimum distribution age and contribution age 

Previously, account holders with a 401(k) or IRA had to withdraw required minimum distributions (RMD) in the year they turned age 70.5. The SECURE Act increases that age to 72. The bill also eliminates the maximum age for traditional IRA contributions which was previously capped at 70.5 years old. 

No more stretch IRAs

Required minimum distributions have also changed for non-spousal account inheritors. Under the current law, beneficiaries who did not inherit their accounts from a husband or wife are in some cases allowed to withdraw required minimum distributions for their life spans.  This could be a few years or a few decades.  

The SECURE Act requires beneficiaries to withdraw all assets of an inherited account within 10 years. There are no required minimum distributions within those 10 years but the entire balance must be distributed after the 10th year. 

Multiple employer plans for small businesses

The Act broadens access to multiple employer plans for small businesses. Previously, companies may have avoided participating in that type of program because of the so-called “one bad apple” rule that stated if one employer did not meet the plan requirements, the plan would fail for all others involved. 

Under the SECURE Act, employers no longer have to share “a common characteristic,” such as being in the same industry. Employer-sponsored retirement plans would also be available to long term part time workers with a lower minimum number of hours worked.  The SECURE Act drops the threshold for eligibility down to either one full year with 1,000 hours worked or three consecutive years of at least 500 hours worked.

Encouraging auto-enrollment 

Finally, the SECURE Act encourages employers to automatically enroll workers into their retirement plans by offering tax incentives. Auto-enrollment is a simple but effective means to get people saving more for their futures. Under the SECURE Act, small employers will get a tax credit to offset the costs of starting a 401(k) plan or SIMPLE IRA plan with auto-enrollment, on top of the start-up credit they already receive.