The July 4 U.S. tax legislation expands reporting obligations for foreign trusts and pass-through entities while locking in key provisions from the 2017 reform. For attorneys and advisors to high-net-worth individuals, this marks a shift toward greater cross-border transparency and stricter enforcement.
This strategic Q&A outlines where the risk profile has shifted and the actions advisors should prioritize for clients with U.S. touchpoints.
1. What are the most significant changes?
The law expands foreign trust and pass-through entity reporting while keeping higher estate and gift tax thresholds in place. For cross-border structures with layered ownership or international components, transparency expectations are higher, and enforcement will target documentation gaps aggressively.
2. Who is most exposed?
Any U.S. person connected to foreign trusts or multi-jurisdictional entities, including family offices, trustees, and institutions with nominee structures. Risk is no longer limited to tax liability. Structural and documentation weaknesses are now enforcement triggers.
3. What should advisors address in reporting and structuring?
Legal, tax, and compliance files must align across FATCA, CRS, and internal documentation. Ownership, control, and substance definitions should be reconciled against evolving regulatory interpretations. Reviews should go beyond tax analysis to assess governance and control structures.
4. Are there immediate deadlines?
Yes. Some provisions take effect in 2025 and 2026, but enforcement will begin sooner. Institutions should update ownership records, reassess trust documentation, and identify risk concentration now.
5. What blind spots are emerging?
- Over-reliance on technology that fails to reconcile governance and risk.
- Assumed safe legacy structures that have not undergone recent review.
- Inconsistent ownership and control documentation across jurisdictions.
6. What does audit readiness mean now?
Documentation must withstand review from regulators, counterparties, and foreign tax authorities. This requires harmonized FATCA, CRS, CTA, and CARF data, with clear evidence of ownership, control, and economic substance.
7. What is the two-year outlook?
Expect faster enforcement and tighter cross-border information sharing. Institutions that delay will face more scrutiny and fewer options. Client perception of readiness will increasingly influence reputation and relationships.
Strategic Actions for Attorneys and Advisors
- Initiate coordinated reviews across legal, tax, and compliance records. Update trust documentation to align with current ownership, control, and substance definitions.
- Map portfolios for reporting conflicts across FATCA, CRS, CTA, and CARF.
- Test governance frameworks against likely regulatory queries. Remediate vulnerabilities in legacy entities.
Institutions and advisors that address these gaps now will reduce enforcement exposure, preserve institutional credibility, and strengthen their position in a tightening regulatory environment.
