Guide
Form 3520: foreign trusts and large gifts
Reporting for US persons who deal with a foreign trust, or who receive a substantial gift or inheritance from abroad.
Reportable and taxable are different questions.
Form 3520 covers two quite different things: transactions with foreign trusts, and large gifts or bequests received from non-US persons.
The second catches people who owe no tax at all. An inheritance from a foreign relative is generally not US-taxable to the recipient, but above the threshold it is still reportable.
At a glance
- Form
- Form 3520, filed separately from your return
- Also
- Form 3520-A, the annual return of a foreign trust with a US owner
- Gift threshold
- Above $100,000 from non-US individuals or estates in a year
- Lower thresholds
- Apply to gifts from foreign corporations and partnerships
- Penalty
- Calculated on the amounts involved, not on tax due
In detail
01
Foreign trusts
Creating, funding, or receiving distributions from a non-US trust is reportable. An ordinary UK family trust is a foreign trust for these purposes.
02
Grantor and non-grantor
Whether the trust is treated as owned by its settlor changes who reports what, and whether Form 3520-A is required in addition.
03
Gifts and inheritances
Above the threshold, report the amount and the relationship. There is generally no tax on the recipient — the obligation is disclosure.
04
Throwback rules
Accumulated income distributed later from a foreign trust can be taxed at punitive rates with an interest charge, so distribution timing is worth planning.
Reporting for US persons who deal with a foreign trust, or who receive a substantial gift or inheritance from abroad.
Frequently asked
My parents gave me money from the UK. Do I report it?
If the total from non-US individuals exceeds the threshold in a year, yes. It is reporting rather than tax, but the penalties for missing it are real.
Is a UK bare trust reportable?
Possibly, depending on how it is classified for US purposes. The UK label does not determine the US analysis.
What if I have missed years?
Reasonable-cause relief exists and correcting voluntarily is materially better than waiting for contact. This is worth advice before filing anything.
This guide is general information, not advice for your circumstances. Cross-border tax turns on detail, and the right answer for someone with a similar situation may not be the right answer for you. Talk to us before acting on anything here.
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