Foreign Trust Account Reporting on FBAR & Form 3520
Foreign Trust Bank Account Reporting: As if dealing with the IRS and Form 3520 for Foreign Trust Reporting is not bad enough, you may have an additional requirement when the trust has foreign accounts; it gets complicated. See, in general when you have a managed investment fund that has various foreign investments in the fund, then you do not have to report the specific accounts within the fund — just the main account. With the foreign trusts, the same rules do not apply. Therefore, if you have foreign bank and other financial accounts within the trust, you may need to report them on items such as the FBAR, FATCA, etc.
Example of Foreign Account Reporting for Trusts
Let’s take a simple example:
Ralph is a U.S. Person (Green Card Holder).
He has a Foreign Trust located outside the U.S.
The trust is a grantor trust in which Ralph is the grantor (or “Settlor”).
The trust has rental properties, and the rental properties deposit funds into a bank account that is in the trust name.
Therefore, the trust has its own bank account in the trust name.
A. Do Trusts File FBAR?
There is no exception to FBAR filing for trusts.
As provided by FinCEN:
“Who Must File
A United States person, including a citizen, resident, corporation, partnership, limited liability company, trust and estate, must file an FBAR to report:
a financial interest in or signature or other authority over at least one financial account located outside the United States if
the aggregate value of those foreign financial accounts exceeded $10,000 at any time during the calendar year reported.”
B. Is a Foreign Trust a U.S. Person?
If the foreign trust is a grantor trust, with a U.S. Person grantor or settlor (owner), then the U.S. Person should presumably file the FBAR on behalf of the trust.
C. What if the Trust Does Not File the FBAR?
If the trust does not file the FBAR, it may become subject to significant fines and FBAR Penalties.
Foreign Gift, Trust, and Inheritance Tax Specialist Team
Our firm specializes exclusively in international tax, and specifically IRS offshore disclosure, including help clients with late reporting of Forms 3520 and 3520-A.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
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How to Hire Experienced Offshore Counsel?
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