Foreign Trust Beneficiary and Form 3520

By ZM Ishmurzina

American expatriates who are beneficiaries of the foreign trust have to follow the special IRS reporting requirements too. Earlier we discussed that the responsible parties, trust owner and trustee are responsible for filing trust forms 3520 and/or 3520-A. However, beneficiaries who receive distributions from the trust have to file form 3520 too with US expatriate tax returns.

This is one of the emails from an American expatriate living abroad. “I recently received a small distribution from a foreign trust. Do you I have to file any additional forms with my US expatriate tax returns?”

Let’s review the key requirements for trust beneficiaries.

Does a beneficiary of any distribution from a foreign trust is responsible to file US expat tax returns?

Per IRC § 6048(c) a beneficiary who receive either direct or indirect distribution from a trust during the taxable year must file US expatriate tax returns. Moreover, a beneficiary must file a special form in regards to the distribution.

Which form must a beneficiary file with US expatriate tax returns?

A beneficiary must file Form 3520 by the due date of US tax return including all extensions. Form 3520 must be filed for the year in which a distribution was received.

Which information must be reported on form 3520 by an American expatriate who is a beneficiary of a trust?

Form 3520 must include the following information:

  • Name of a trust
  • Aggregate amount of distribution received during the year
  • Other relevant information determined by the Secretary

Conclusion

Americans living abroad must realize that they might have a foreign trust and didn’t know about its existence. American expatriates might have a trust if they have fideicomiso in Mexico or individual pension accounts in the United Kingdom.

American expatriates who need any further guidance about foreign trust requirements and other overseas tax issues like FBAR, FATCA, PFIC, controlled foreign corporation must consult an international tax CPA that provides expatriate tax services for Americans living abroad. International tax experts at Artio Partners are here to help you.