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Forms 3520 and 3520-A report your relationship to a foreign trust: distributions received, gifts, and trust ownership, under the tax code. The FBAR asks a different question under a different law: who has financial interest in, or authority over, the trust’s actual accounts. Filing the trust forms never ends the account analysis. Six actors surround every foreign trust, grantor, beneficiary, trustee, protector, adviser, and signer, and each one runs their own FBAR question.
Two regimes, one trust
Foreign trust reporting is where the tax code works hardest, so people assume it covers everything. Form 3520 captures what you received or gave; Form 3520-A is the trust’s own annual return; the penalties behind both are famous.
None of it reaches FinCEN. The FBAR runs under Title 31, and it does not care what the trust distributed or who owns it for tax. It cares which U.S. persons can be connected to the trust’s bank and investment accounts, by interest, by title, or by authority.
The two systems also triangulate. Your 3520 filings tell the IRS the trust exists; FATCA feeds from the trust’s banks tell FinCEN the accounts exist; and the FBAR missing between the two is a gap both agencies can see without asking you anything.
The worry sounds like this:
“The trust filed Form 3520-A. Do I still need an FBAR?”
“I’m just a beneficiary. Are the trust’s accounts mine to report?”
“I’m the U.S. trustee of my family’s foreign trust. Whose FBAR is that?”
Short answers: quite possibly, because the forms answer different questions. It depends on how present and how large your interest is. And very likely yours, twice over. The actor-by-actor framework below sorts everyone.
The two regimes, side by side
| Forms 3520 and 3520-A | FBAR (FinCEN Form 114) | |
| Reports | Trust transactions and ownership: distributions, gifts, and the trust’s own annual return | The trust’s accounts: institution, account number, and maximum annual value |
| Filed with | The IRS, with your return, or through the trust’s U.S. agent | FinCEN, through the BSA E-Filing System |
| Asks about | Your relationship to the trust | Your relationship to the trust’s money |
| Measurement | Distribution amounts, gift values, and trust ownership status | $10,000 combined maximum account value at any time in the year |
| Penalty family | The greater of $10,000 or a percentage of the trust amounts, form by form | Up to $16,536 per report non-willful; far more if the facts read willful |
The numbers that frame it
- 6: actors around one trust: grantor, beneficiary, trustee, protector, adviser, and signer. Each runs a separate analysis.
- 50%: the present beneficial interest line that puts the trust’s accounts on a beneficiary’s own FBAR.
- 1 exception: the beneficiary relief, and it works only when a U.S. person trustee or agent actually files the covering FBAR.
- 35% or $10,000: the Form 3520 penalty family, calculated on the trust amounts, entirely separate from every FBAR number.
- $16,536: the current non-willful FBAR penalty, per missed report, per year.
Six actors, one question each
The framework comes straight from 31 C.F.R. 1010.350: financial interest, legal title, beneficial ownership, or signature authority. Walk each actor through it.
The grantor. A grantor who owns the trust for U.S. tax purposes, the grantor trust pattern, holds financial interest in the trust’s accounts. They report every account at full maximum value, exactly as if the trust were their wallet.
The beneficiary. A U.S. beneficiary with a present beneficial interest above 50% of the trust’s assets or income for the year holds financial interest too. Present is the operative word, and the next section handles this actor’s exception with the care it demands.
The trustee. A U.S. person serving as trustee holds legal title to the trust’s accounts, and legal title is financial interest whether or not a dollar benefits them. The trustee usually holds signature authority besides: two paths, one filer, every account.
The protector and the adviser. Powers over the trustee are not automatically powers over the bank. Whether a protector or investment adviser can direct the institution itself is a document question, and it is exactly the analysis our Trust-stage guide to non-grantor trusts and signature authority runs in depth.
The signer. Anyone the bank will act for, family member, employee, or friend of the settlor, holds signature authority and a personal filing duty, ownership or not.
One actor sits outside the list by design: the settlor of a genuine non-grantor trust who kept no tax ownership and no powers may hold no financial interest through the grantor clause at all. Kept powers change that answer fast, and mapping them is the deep analysis the non-grantor guide linked above exists for.
Valuation runs the same for everyone who files: each of the trust’s accounts reports at its full maximum value for the year, converted at the Treasury year-end rate. A 60% beneficial interest never prorates the number; the whole account reports, whole.
One trust, four filers
Put the framework on a family. A grandfather abroad, never a U.S. person, settled a foreign trust years ago. Today his daughter in Miami holds a 60% present interest in the income, his son serves as the U.S. trustee, and a granddaughter handles administration with online signing power at the trust’s bank.
Count the reports. The son files: legal title plus authority, every account, full values. The granddaughter files: authority alone, same accounts. The daughter’s 60% interest would make her file too, except the exception can excuse her here, and only here, because a U.S. person trustee actually files an FBAR covering the accounts, and she keeps proof of it.
The grandfather files nothing, because he never became a U.S. person. Four family members, one trust, three FBAR analyses that reached different answers for documented reasons. That is what handled factually looks like.
The beneficiary exception, handled factually
The rules do contain one piece of beneficiary relief, and it is conditional, not automatic. A U.S. beneficiary who would otherwise report through a greater than 50% interest is excused when the trust, its trustee, or its agent is a U.S. person that files an FBAR actually disclosing the trust’s accounts.
Every clause in that sentence is a condition. There must be a U.S. person in one of those roles. That person must file. The filing must cover the accounts. A foreign trustee satisfies none of it, and a U.S. trustee who never filed satisfies nothing either.
So the exception is claimed with evidence, not assumptions: confirm the covering FBAR exists, know what it disclosed, and keep proof in your own records for the years you relied on it. Discretionary beneficiaries sit differently again: hopes of a distribution are generally not a present beneficial interest, and the year a large distribution arrives, the numbers deserve a fresh look.
The test also runs year by year, against that calendar year’s assets or income. Interests move: a class of beneficiaries closes, an income split changes, a sibling disclaims, and last year’s 40% becomes this year’s 55%. The beneficiary who checked once and filed never again is the beneficiary this rule was written about.
And the forbidden sentence stays forbidden: the trust filed Form 3520, so no FBAR. The trust forms cannot excuse the account report, because they were never asking about the accounts.
Common mistakes with trust accounts
- Saying the trust filed Form 3520, so no FBAR. The regimes never substitute for each other.
- Claiming the beneficiary exception without confirming a U.S. person actually filed the covering FBAR.
- The grantor of a grantor trust skipping accounts they own for tax purposes.
- The U.S. trustee forgetting that legal title is financial interest, benefit or not.
- Treating discretionary hopes as a present beneficial interest, or dismissing a large interest without running the numbers.
- Fixing the trust forms while the FBARs stay missing. The regimes repair separately.
Map the actors, then file
Trust files age badly, which is why the mapping is not a one-time event. Actors change, trustees rotate, interests shift, and the FBAR analysis that was right at settlement drifts wrong silently. An annual re-map, deed and signature cards in hand, is cheap; discovering the drift in an examination is not.
Start with the trust deed and the signature cards, and name every U.S. person in each of the six roles. The account categories, thresholds, and valuation rules those people file under are mapped in our advanced FBAR reporting guide, and when prior years are missing on either regime, the correction lanes are compared in how foreign account mistakes are repaired.
The Form 3520 instructions carry the trust-side mechanics: who files for distributions, gifts, and ownership, and how the trust’s own return connects. What they never carry is a single account number, which is the whole point of this article.
At Ed Parsons CPA, foreign trust files get both regimes in one engagement: the Form 3520 CPA Filing service covers the transactions and ownership reporting, and the FinCEN Form 114 FBAR CPA Filing service maps the accounts actor by actor, so the trust’s paperwork and the trust’s money finally agree.
