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𝗛𝗮𝘀 𝘆𝗼𝘂𝗿 𝗔𝗺𝗲𝗿𝗶𝗰𝗮𝗻 𝗲𝘅𝗽𝗮𝘁 𝗰𝗵𝗶𝗹𝗱 𝗳𝗶𝗹𝗲𝗱 𝘁𝗵𝗲𝗶𝗿 𝗙𝗕𝗔𝗥?
A startling US Department of Treasury regulation states that "... a child is responsible for filing his or her own FBAR report."
Really? Yes, really. Don’t believe me? See this document.
An FBAR, incidentally, is an annual report required of all American citizens who have financial assets in foreign institutions that total more than $10,000.
The FBAR (Foreign Bank Account Report) requires one to provide details about amounts, locations, and identification numbers. Penalties for noncompliance are potentially very severe.
This insane FBAR kid rule triggers a reaction of disbelief followed by many questions. To begin with, How could a child possibly complete an FBAR? If you’ve done an FBAR, you know what I mean.
The regulation makes no mention of child age or capacity. FBAR completion can tax an adult, which is why specialized accounting firms charge $100 or more to complete an FBAR. Perhaps the child could find a specialized expat accountant?
A child is not legally responsible for much of anything. Legalities aside, it’s absurd to think a child could complete an FBAR.
I say that as someone with expertise. Apart from parenting my four kids, I taught university courses about child development for 40+ years.
Authors of the kid-FBAR policy must’ve known the absurdity of the policy, so they added the following sentence: If a child cannot file his or her own FBAR for any reason, such as age, the child's parent, guardian, or other legally responsible person must file it for the child.
Weird. Who determines if a child cannot file? Why didn’t the policy put the legal onus on the parent to begin with? Does the parent have to be an American? I can’t answer these questions, but I suspect the policy hides a legal quagmire.
Why is such a policy needed anyway? What expat kid is sitting on $10K in financial accounts? Not many that I know.
The absurd kid-FBAR rule probably arises because foreign (non-US) trust accounts are FBAR reportable. A child with American citizenship who is the beneficiary of a non-US trust account would have to report the value of that trust on their FBAR.
A trust account might well exceed $10K in value. After all, one doesn’t typically pay a lawyer’s rates to create a legal trust to handle $100’s. If the beneficiary is an American expat and if the trust is in a non-US institution, the trust has FBAR consequences.
I suspect FBAR-trust absurdities often involve issues of inheritance. For example, a grandparent might want their expat American grandchild to inherit assets that would become available when the grandchild reaches adulthood. A trust would be a good legal way to accomplish that.
Alas, if the trust account lived outside the US, the expat American grandchild and their parents would also inherit FBAR liabilities and expenses.