FBAR Direct prepares and files your FBAR (FinCEN Form 114) on your behalf. You are responsible for reviewing all information for accuracy before submission to FinCEN. This article is for informational purposes only and does not constitute tax, legal, or financial advice.

FBAR vs Form 3520 Foreign Trust: When You Need One, the Other, or Both

US taxpayers connected to a foreign trust face two separate reporting obligations. When a person holds, creates, or receives distributions from foreign trust accounts, reporting requirements are different depending on the form. The FBAR and Form 3520 go to different agencies and carry different penalty structures.

The FBAR (FinCEN Form 114) — the Report of Foreign Bank and Financial Accounts FBAR — reports accounts held by a trust. The Annual Return to Report Foreign Trust Transactions is Form 3520, and the Form Annual Information Return of a Foreign Trust with a US Owner is Form 3520-A. Each form and form requirements differ — the report goes to FinCEN while Form 3520 or Form 3520-A goes to the IRS.

FBAR vs Form 3520 Foreign Trust: What Is the Key Difference?

The two reports serve different purposes. The FBAR covers accounts held in trusts when the aggregate value exceeds $10,000 at any point during the calendar year under 31 CFR 1010.350. Form 3520 is an annual return to report transactions with a foreign trust under IRC Section 6048 — creating the trust, transferring property, or receiving distributions from foreign trust accounts. A beneficiary of foreign trust who receives distributions must report these transactions on this annual return.

The return also covers receipt of a foreign gift above the annual threshold. File Form 3520 if the trust is foreign and you received a distribution from foreign trust holdings — regardless of the amount. Some retirement accounts qualify as foreign trusts, so check before skipping this filing form. Each form and its requirements differ, so a US person must file the correct form or both forms and returns.

When Does the FBAR Apply to Foreign Trust Accounts?

The report applies when a US person holds a financial interest in or signature authority over a foreign account within a trust. Under 31 CFR 1010.350(e)(3), a US person must file the form for any account of foreign trust with a grantor ownership interest for US income tax purposes — or as a beneficiary with more than 50% of trust assets or income.

The threshold under 31 CFR 1010.306 stays at $10,000 aggregate across all foreign bank and financial accounts at any point during the calendar year.

Who Files the FBAR for Foreign Trust Accounts?

Under 31 CFR 1010.350, these US persons must report trust-related accounts on the FinCEN form:

The trustee, if a US person and the trust holds bank accounts abroad
The grantor, when the grantor qualifies as the owner of foreign trust property for US income tax purposes (a "grantor trust" under IRC Sections 671-679)
A US beneficiary with a present beneficial interest exceeding 50% of trust assets or income

If multiple US persons hold a financial interest in the same account, each must file separately.

How Do Grantor Trusts Differ From Non-Grantor Trusts?

The grantor trust rules under IRC Sections 671-679 determine whether the US grantor qualifies as the owner of foreign trust property. A grantor of a foreign trust reports its foreign accounts as if those foreign financial accounts belonged to the grantor directly.

For a non-grantor trust, the obligation shifts to the US trustee or US beneficiaries meeting the 50% interest threshold. Beneficiaries with smaller interests may still need to report their own foreign accounts abroad.

When Does Form 3520 Apply to Foreign Trust Transactions?

Form 3520 applies to foreign trust transactions when you complete specified events during the tax year. Under IRC Section 6048, the Internal Revenue Service requires form filing for three categories:

Creating or transferring property to a trust — Use this form to report the creation and any transfers of money or property.
Receiving distributions — Report any distribution, regardless of whether you treat it as income or principal. Distributions trigger this return even if you owe no income tax.
Owner treatment — If you qualify as the owner of any portion of a trust under the grantor rules, the trust must file Form 3520-A annually.

Let FBAR Direct prepare your FinCEN filing — we handle account reporting, and you review before we submit.

Who Must File Form 3520?

The US person files this return, not the trust itself:

A US citizen or resident who creates a trust or transfers property to one
Any beneficiary of a foreign trust who receives a distribution
A US person who qualifies as the owner of foreign trust property under IRC Sections 671-679

Form 3520 attaches to your income tax return (Form 1040). The form is due with your return, including extensions, under IRC Section 6048(c). Failure to file triggers automatic penalties. Taxpayers of the United States and its territories may be required to report transactions with foreign trusts on Form 3520.

What Is Form 3520-A?

Form 3520-A is the Form Annual Return to Report a Foreign Trust with a US Owner — an information reporting return for the trust itself. The trust files this — or the US owner files it if the trust fails to do so. This return is due March 15 under IRC Section 6048(b). Without timely filing, the Internal Revenue Service may assess penalties against the US owner.

The two returns work together: the trust files Form 3520-A to report income and assets, while the US person files the other to report transactions. File Form 3520 and Form 3520-A for any foreign trust with owner filing status under US tax law. Missing either creates separate penalty exposure.

How Do FBAR and Form 3520 Reporting Requirements Compare?

A trust may trigger one filing, the other, or both. The FBAR and Form 3520 each carry separate requirements, and Form 3520-A adds another layer. This table compares them side by side for the tax year:

Category	FBAR (FinCEN Form 114)	Form 3520	Form 3520-A
What it reports	Foreign bank and financial accounts	Transactions with foreign trusts and certain foreign gifts	Annual information return of foreign trust income and assets
Governing law	31 USC 5314, 31 CFR 1010.350	IRC Section 6048	IRC Section 6048(b)
Filed by	US person with financial interest or signature authority	US person with trust transactions	Foreign trust (or US owner if trust fails to file)
Filed with	FinCEN via BSA E-Filing	IRS with Form 1040	IRS (separate mailing)
Threshold	$10,000 aggregate at any point	No dollar threshold	Required if any US owner exists
Deadline	April 15; auto extension to October 15	Same as tax return (April 15; extensions available)	March 15; 6-month extension available
Non-willful penalty	Up to $16,117 per violation (31 USC 5321)	35% of gross value (IRC Section 6677)	5% of gross value of trust assets (IRC Section 6677)
Willful penalty	Greater of $100,000 or 50% of balance (31 USC 5321)	Additional civil and criminal penalties	Additional civil and criminal penalties

What Penalties Apply to FBAR and Form 3520 Failures?

FBAR Penalties

Under 31 USC 5321(a)(5), non-willful violations carry penalties up to $16,117 per violation (2026 adjusted). After United States v. Bittner (2023), non-willful penalties apply per report. Willful violations reach $100,000 or 50% of account balance, whichever is greater. Criminal penalties add up to $250,000 and five years imprisonment. See penalties for detail.

Form 3520 and Form 3520-A Penalties

Under IRC Section 6677:

Form 3520 for distributions or transfers: 35% of gross value
Form 3520-A: 5% of gross value of the portion of trust assets owned by the US person

These percentages apply to total value of the property — not the taxable portion. A $500,000 distribution could trigger a $175,000 penalty on Form 3520. The minimum penalty per form is $10,000. Penalties for late filing of form obligations apply separately: a beneficiary faces both the 35% penalty and the FBAR penalty. Reasonable cause may support abatement.

Do You Need Both FBAR and Form 3520? A Decision Framework

Use this decision framework to determine whether you need both the FBAR and Form 3520 for your foreign trust situation. If your trust triggers multiple steps below, you need both filings:

Step 1: Does the trust hold accounts abroad? If yes, and you have a financial interest under 31 CFR 1010.350(e)(3), confirm the total value exceeds $10,000. If so, the FinCEN report applies.

Step 2: Did you create the trust or transfer property to it? If yes, file Form 3520 under IRC Section 6048(a).

Step 3: Did you receive a distribution from the foreign trust? If yes, file Form 3520 under IRC Section 6048(c).

Step 4: Are you the owner of the trust property? If yes, the trust must file Form 3520-A. You may also need to report accounts on the FBAR FinCEN Form Report of Foreign Bank and Financial Accounts.

What Do Real-World Foreign Trust Scenarios Look Like?

Scenario 1: US Grantor With a Cayman Islands Trust

David, a US citizen abroad, set up a Cayman Islands trust and transferred $800,000 in foreign investments. The trust holds accounts worth $950,000, and the IRS treats David as the grantor under IRC Section 679.

FinCEN report: Required — $950,000 far exceeds the $10,000 threshold under 31 CFR 1010.350(e)(3).
Form 3520-A: Required annually. If the trust cannot file, David must file as the US owner.
Form 3520: Filed when he created the trust and transferred property of $800,000.

Scenario 2: US Beneficiary of a Swiss Family Trust

Lisa, a US citizen, received a $200,000 distribution from a trust her non-US grandfather created in Switzerland. She did not create the trust or transfer property.

FinCEN report: Depends on whether the beneficiary of foreign trust the account sits in controls more than 50% of assets under 31 CFR 1010.350(e)(3). Below 50%, no reporting obligation.
Form 3520: Required under IRC Section 6048(c). The penalty could reach $70,000 (35% of $200,000).

What Special Considerations Apply to Foreign Retirement Accounts?

Special considerations apply to foreign retirement accounts because UK SIPPs, Australian superannuation funds, and Indian provident funds often qualify as foreign trusts under IRC Section 7701(a)(30). If the IRS classifies your retirement account as foreign, this creates offshore tax and international tax issues.

Contributions made while a US person may trigger reporting requirements. Treaty provisions between the United States and its partners sometimes allow income deferral, but you may still need to report the total value of assets on your income tax return. A US person treated as the owner need not report domestic accounts — but must report offshore accounts on both filings. See reporting retirement accounts for detail.

How Does This Compare to Other Foreign Reporting Forms?

Beyond the two main filings, a US person connected to a foreign trust may also need additional tax forms for international reporting purposes. The requirements and obligations depend on the trust structure, the amount of assets, and the type of property held during the tax year:

Form 8938 (FATCA): Reports specified foreign financial assets above threshold amounts under IRC Section 6038D. See FBAR vs FATCA Form 8938 differences.
Form 8865: Applies if the IRS treats the foreign trust as a foreign partnership. See FBAR vs Form 8865.
Form 5471 or 5472: Applies if the trust owns a foreign corporation.

All of these forms can apply to the same trust in the same tax year. Review whether additional obligations apply to your situation.

Frequently Asked Questions

These frequently asked questions cover FBAR and Form 3520 filing requirements for US taxpayers with foreign trust connections. The answers explain when person-level filing obligations arise, the amount of each penalty for failure to comply, and how offshore reporting rules apply.

Does the FBAR cover foreign trusts?

Yes. Under 31 CFR 1010.350(e)(3), US grantors and any beneficiary with more than 50% beneficial interest must report trust-held accounts — whether domestic or foreign. The FinCEN filing covers accounts, not the trust itself. If accounts exceed $10,000 in aggregate, the obligation applies.

What is the Form 3520 penalty for a late filing?

The penalty under IRC Section 6677 is 35% of the gross value of distributions or transfers. The minimum penalty is $10,000. Form 3520-A carries a separate 5% penalty on trust assets.

If I am a foreign trust beneficiary but did not create the trust, do I still need to file?

Yes. Under IRC Section 6048(c), any US person who receives a distribution from a foreign trust must file Form 3520. The obligation arises from receiving the distribution, not from creating the trust.

Can I use the streamlined filing procedures for missed foreign trust reporting?

The IRS Streamlined Filing Compliance Procedures may reduce penalties for non-willful failures. Read our article on penalties and late filing options, then consult a tax professional.

Does a foreign trust need to file the FBAR?

A trust is not a US person and has no obligation to file the report. The US trustee must file if the trust holds bank accounts abroad under 31 CFR 1010.350.

Do foreign retirement accounts trigger Form 3520?

Many do. If a retirement plan in a country outside the US qualifies as a trust under IRC Section 7701(a)(30), contributions made while a US person may trigger this return. See our guide on reporting pension accounts.

Let FBAR Direct Handle Your Filing

Let FBAR Direct handle your filing so you avoid costly penalties. Missing Form 3520 can cost 35% of the gross distribution value, and missing the FinCEN report alone carries penalties up to $16,117 per violation.

Let FBAR Direct prepare your filing — you review all details and approve before we submit. See how it works.

Tax regulations change frequently. Always verify current filing requirements at IRS.gov or FinCEN.gov. For advice specific to your situation, consult a qualified tax professional. This article is current as of March 11, 2026.