I've not heard of this one before, and am in need of assistance. An individual wants to open an "Unincorporated Irrevocable Fiduciary Business Trust Organization" - referred to as a UBTO. I've never heard of such an entity, and so far, my research has shown that it appears to be legal. (They also provided a "Bank Resolution Minute" from a meeting stating that this is "A Pure, Private, Irrevocable, Common Law, Non-statutory, Non-associated, Limited Liability, Unincorporated Business Trust Organization." Whew!)

The part that concerns me most is that when the individual was told we would need to set up Customer Info Files on all authorized signers and obtain identifying information, he began to quote the Privacy Act of 1974 - which is also written in their minutes: "Pursuant to the Privacy Act of 1974, acting in the best interest of the UBTO, the above named signatories shall neither be required, nor allowed to render or reveal their own individual Social Security Numbers. However, for identification purposes only, the Institution may ask (and you must provide) proper and suitable identification. Otherwise, all business conducted for or on behalf of the UBTO is Trust business, covered by the Trust's own identity." Under the USAPA and/or CIP (which - I realize isn't in effect as yet) - we're not comfortable with this disclaimer. Can we refuse to open the account based upon bank policy of obtaining and recording identifying information for all signers? Thanks!

I'd refer the person to the new law "CIP" since parts of it are in fact in effect already, and if they don't want to comply refuse the account. You might want to consider an SAR, why do these people want to hide their identity. I don't believe the law will protect anyone just because they write in their by-laws they don't want to give out their personal information. Good luck

You can refuse to open any account (as long as you recognize any possible disparate impact issues).

This sounds like trouble in the future. I would pass on this one.

Thanks! I've done a bit more research, and we'll be refusing the account - and completing a SAR. The IRS has issued several warnings about these kinds of trusts on their site: IRS - CI Site

I have run into these before. They are promoted by anti-tax groups who claim taxes are unconstitutional, that they don't have to give SSANs and everything is an invasion of their privacy. Some also do everything to avoid individual liability.

Do what I did, send them to a competitor.

(You can also blame us lawyers and tell them you will need to get a legal opinion as to their status, etc. and they will have to pay for it and that you want to check with the IRS. :-) ]

That's basically what I found out, too - didn't sound like anything we'd like to promote. I've had customers in the past who had the same attitude. They can go elsewhere!

Great info...I didn't even know about UBTO's...Thanks

For those who might want to know more about the Privacy Act of 1974....I recall that complianceheadquarters.com had an excellent article on that Act's requirements.

This trust type is legal, and I have clients using them that also have bank accounts. The site you reference (the IRS site) does not say that these trusts are illegal, and specifically detail that there are several types of entities that can be used for illegal activities... none are exempt from abuse for tax evasion... LLC's corporations, partnerships as well as unincoporated business trusts. Because a customer uses a UBTO should not immediately cause you to be suspicious. One benefit of a business trust is that they are unincorporated, and as such, are not required to file with the state. In California, for example, this leads to an annual savings of $800 (the cost of the annual report required by the state). UBTO's are also used for asset protection and estate planning, and again are completely legal (and also recognized) to do so. Remember, all entities can be used for illegal activities, it's the individual behind the entity that creates the abuse, not the entity itself.

However, your customer's Trust statement regarding the Privacy Act does not exempt them from your CIP program, or any other Act of Congress that your institution is subject to. If the individual that is opening the account is a U.S. person, then they are required by the Patriot Act to disclose their SSN.

Business trusts were very popular the beginning of last century, and some laywers continue to work with them today. They are fantastic instruments in certain situations, and I wholeheartedly endorse their use for specific actvities.

I hope that this clears up some misconceptions about UBTO's. Feel free to visit our website if you have more questions: www.trustarchitects.com (we are estate planners and managers).