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  1. I have a further question with respect to the above. The FBAR form has a separate part for financial accounts “owned separately” and those “owned jointly.” Assuming there are two or more trust beneficiaries and that they (or some of them) have to file, does the beneficiary use the part for accounts owned separately (as the trust is the “owner of record”), or the part for accounts owned jointly (viewing the beneficiaries, for this purpose, as “joint owners”)? Does anyone out there know the answer to this question?

  2. The key is whether the trust beneficiary has a “financial interest” in the account. Per the current FBAR instructions, a US beneficiary has a financial interest in an account if the account is owned by “A trust in which the United States person has a greater than 50 percent present beneficial interest in the assets or income of the trust for the calendar year[.]”

    If a majority of the trust’s DNI is distributed to a US beneficiary during the year, I would imagine the beneficiary would be considered to have a greater-than-50% present beneficial interest in the income of the trust for the year. (This may be more clear – or not — to Phil and others who deal with trusts more than I do.)

    Note that the formulation in the 2011 FBAR regulations is a bit different. Under those regulations, a US beneficiary has a financial interest in an account if the account is owned by “A trust in which the United States person either has a present beneficial interest in more than 50 percent of the assets or from which such person receives more than 50 percent of the current income.”

    Clearly (I think) the latter test is satisfied in the case where a majority of the trust’s DNI is distributed to a US beneficiary during the year, and I tend to assume the FBAR instructions were meant to apply in the same scenario.

    So, I believe the US beneficiary has an FBAR-filing obligation for 2013, but not 2014 (and later years will depend).

  3. Michael, Phil,

    This is interesting. I have asked this question to a number of attorneys and have received conflicting answers. Scenario: a foreign non grantor trust has 3 discretionary beneficiaries of which only one is a US person. The US beneficiary receives a distribution in 2013 of 100% of the trust’s DNI and no distribution at all will be received in 2014 (will go to the other 2 benes). What are the US beneficiary’s reporting requirements with respect to FBAR and the trust accounts? No reporting requirement either year? Yes in 2013 but no in 2014? Yes in 2013 and thereafter?

  4. I agree that they expect the max value of the entire account. A good analogy is found in the joint account context, and there the instructions expressly say to report the max value of the entire account. I think it makes sense that the approach for an “indirect financial interest” through a trust would be the same.

  5. Sorry about doing this piecemeal.

    See also GCM 37,900 (Mar. 29, 1979) (“it will almost always be true that no individual beneficiary ‘has a present beneficial interest in more than 50 percent of the assets’ of the trust. Consequently, no Form 90-22.1 need be filed by any of those beneficiaries.”); New York State Bar Association, Report on the Rules Governing Reports on Transactions with Foreign Financial Agencies (FBARs), October 30, 2009, at Part VII(C)(2)(b)(i), p. 122 (“In the case of a typical discretionary trust, it would seem that no person has a greater than 50% present beneficial interest in the trust assets because no person has a right to or – in very many typical discretionary family trusts – even the expectation that the person will receive more than 50% of the assets of the trust.”).

  6. The preamble to the 2011 FBAR regulations provides as follows:

    FinCEN recognizes that in the case of trusts, determinations regarding beneficial interest for purposes of filing the FBAR may be difficult if the person is a beneficiary of a discretionary trust or has a remainder interest in a trust. After considering this comment, FinCEN has revised section 103.24(e)(2)(iv) to change the term ‘‘beneficial interest’’ to ‘‘present beneficial interest.’’ FinCEN does not intend for a beneficiary of a discretionary trust to have a financial interest in a foreign account simply because of his status as a discretionary beneficiary.

  7. Regarding the question of when/whether a beneficiary of a discretionary trust needs to report an account of the trust on the FBAR, there is some very helpful language in the preamble to the 2011 FBAR regulations, and some other guidance as well. When I have a chance I’ll follow up with details.

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