Estate FBAR Requirements - Estates with Foreign Assets | IRS Penalty (Golding & Golding)

Estate FBAR Requirements – Estates with Foreign Assets | IRS Penalty (Golding & Golding)

Estates & Offshore Accounts – Foreign Estate Assets | FBAR & FATCA

Estate FBAR RequirementsEven though an Estate is not technically an individual, there are still Estate FBAR Requirements to be aware of for the “estate.” There is a common misconception that only individuals have to file the FBAR — but that is not true, The FBAR is required for Estates, Trusts, Corporations, etc. that meet the IRS FBAR filing requirement.

Estates & Offshore Accounts

When a person passes, generally, accounts and assets within the name of the decedent will be transferred into the name of the Estate.

So, what happens when the estate has foreign accounts in its name, and those foreign accounts have an annual aggregate total that exceeds $10,000?

The Personal Representative/Executor would have to file the FBAR on behalf of the estate. The requirement coincides with filing the estate tax returns.

Foreign Estate (and Decedent) Assets

What about the decedent’s final tax return?

If the decedent passed away with accounts under his or her name, that meet the threshold requirements for filing — the person filing the final tax return on behalf of the decedent would have to file the FBAR as well.

*Besides the FBAR, there may be additional informational reporting as well (see below).

Common International Informational Reporting Forms

The following is a list of the more common forms you may have missed:

FBAR (FinCEN 114)

The FBAR is used to report “Foreign Financial Accounts.” This includes investments funds, and certain foreign life insurance policies.

The threshold requirements are relatively simple. On any day of the year, if you aggregated (totaled) the maximum balances of all of your foreign accounts, does the total amount exceed $10,000 (USD)?

If it does, then you most likely have to file the form. The most important thing to remember is you do not need to have more than $10,000 in each account; rather, it is an annual aggregate total of the maximum balances of all the accounts.

Form 8938

This form is used to report “Specified Foreign Financial Assets.”

There are four main thresholds for individuals is as follows:.

  • Single or Filing Separate (in the U.S.): $50,000/$75,000
  • Married with a Joint Returns (In the U.S): $100,000/$150,000
  • Single or Filing Separate (Outside the U.S.): $200,000/$300,000
  • Married with a Joint Returns (Outside the U.S.): $400,000/$600,000

Form 3520

Form 3520 is filed when a person receives a Gift, Inheritance or Trust Distribution from a foreign person, business or trust. There are three (3) main different thresholds:

  • Gift from a Foreign Person: More than $100,000.
  • Gift from a Foreign Business: More than $16,076.
  • Foreign Trust: Various threshold requirements involving foreign Trusts

Form 5471

Form 5471 is filed in any year that you have ownership interest in a foreign corporation, and meet one of the threshold requirements for filling (Categories 1-5). These are general thresholds:

  • Category 1: U.S. shareholders of specified foreign corporations (SFCs) subject to the provisions of section 965.
  • Category 2: Officer or Director of a foreign corporation, with a U.S. Shareholder of at least 10% ownership.
  • Category 3: A person acquires stock (or additional stock) that bumps them up to 10% Shareholder.
  • Category 4: Control of a foreign corporation for at least 30 days during the accounting period.
  • Category 5: 10% ownership of a Controlled Foreign Corporation (CFC).

Form 8621

Form 8621 requires a complex analysis, beyond the scope of this article. It is required by any person with a PFIC (Passive Foreign Investment Company).

The analysis gets infinitely more complicated if a person has excess distributions. The failure to file the return may result in the statute of limitations remaining open indefinitely.

*There are some exceptions, exclusions, and limitations to filing.

What if I am Out of FBAR Compliance?

If you are out of FBAR compliance, the penalties can be severe. Therefore, you may consider entering the IRS offshore voluntary disclosure/tax amnesty, before it is too late.

Golding & Golding, A PLC

We have successfully represented clients in more than 1,000 streamlined and voluntary disclosure submissions nationwide and in over 70-different countries.

We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.

Golding and Golding, Board-Certified Tax Law Specialist

Golding and Golding, Board-Certified Tax Law Specialist

Golding & Golding: Our international tax lawyers practice exclusively in the area of IRS Offshore & Voluntary Disclosure. We represent clients in 70+ different countries. Managing Partner Sean M. Golding is a Board-Certified Tax Law Specialist Attorney (a designation earned by < 1% of attorneys nationwide.). He leads a full-service offshore disclosure & tax law firm. Sean and his team have represented thousands of clients nationwide & worldwide in all aspects of IRS offshore & voluntary disclosure and compliance during his 20-year career as an Attorney.

Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.
Golding and Golding, Board-Certified Tax Law Specialist