FBAR Financial Interest: Ownership, Trusts, and Nominees

For FBAR purposes, you have a financial interest in a foreign account whenever federal law treats you as the real owner of that account, even if your name is nowhere on the bank’s paperwork. The regulation at 31 CFR 1010.350 sets out several categories: direct title, ownership through a business entity, certain positions in a trust, and any arrangement where someone else holds the account as your agent or nominee.¹ If any of those apply and your qualifying foreign accounts together exceed $10,000 at any point in the calendar year, you must file FinCEN Form 114.²

Direct Ownership

The simplest case is having your name on the account. If you are the owner of record or hold legal title to a foreign financial account, you have a financial interest in it.¹ It does not matter whether the account was set up for your own benefit or someone else’s. The rule keys off the formal documentation, not who deposited the money or who eventually spends it.

So if you opened a foreign savings account for a family member and your name is on it as the titleholder, you carry the filing obligation. The source of the funds and the identity of the person actually using the account are irrelevant.

Joint Accounts and Spouses

Joint ownership creates a financial interest for every person named on the account. If you and your spouse each hold joint accounts abroad, both of you technically have separate filing obligations. A married couple can avoid filing two separate FBARs if three conditions are met: every one of the non-filing spouse’s reportable accounts is jointly held with the filing spouse, the filing spouse reports those accounts on a timely FBAR with an electronic signature, and both spouses complete and keep a signed FinCEN Form 114a authorizing the joint filing.³ If any of those conditions fail, each spouse must file separately and report the entire value of the shared accounts.

Ownership Through a Business Entity

Your financial interest extends to foreign accounts held in the name of a business you control. The test is whether you own, directly or indirectly, more than 50 percent of the entity.¹ The threshold is the same across entity types; the measuring stick shifts:

For a corporation, you meet it if you own more than 50 percent of either the total voting power or the total value of the shares.
For a partnership, you meet it if you own more than 50 percent of the profits interest or the capital interest.
For an LLC or other entity, you meet it if you own more than 50 percent of the voting power, total equity value, assets, or interest in profits.

The word “indirectly” is where this catches people. If you own 100 percent of a U.S. holding company that in turn owns 100 percent of a foreign subsidiary, you have a financial interest in the subsidiary’s foreign bank accounts, even though you personally sit two layers away. Trace the ownership through the full chain of entities and check the more-than-50-percent threshold at each level.

Beneficial Interest in a Trust

Trusts create two separate paths to a financial interest, depending on your role.

Beneficiaries With a Majority Interest

If you are a trust beneficiary and your present beneficial interest in the trust’s assets or income exceeds 50 percent for the calendar year, you have a financial interest in the trust’s foreign accounts.¹ “Present beneficial interest” means your actual share of distributions or entitlement during that specific year, so the calculation can shift from year to year as distributions change. Review the trust documents and any amendments to pin down the percentage.

Discretionary trusts complicate the math. When a trustee has full discretion over whether and how much to distribute, a beneficiary’s present beneficial interest is hard to quantify. The IRS notes that you do not need to report a trust’s foreign accounts if a U.S. person (such as the trustee) already files an FBAR covering those accounts.² Beyond that narrow exception, the regulations do not offer bright-line guidance for discretionary beneficiaries. If you are named as a beneficiary of a foreign discretionary trust, this is a good place to bring in professional advice.

Grantor Trusts

If you created a trust and retained enough control that you are treated as the owner of the trust’s assets for federal income tax purposes, you have a financial interest in every foreign account the trust holds. That applies regardless of how much is actually distributed to beneficiaries during the year. Sections 671 through 679 of the Internal Revenue Code determine whether you fall into this category. Common triggers include retaining the power to revoke the trust, controlling who receives distributions, or holding certain reversionary interests.

Accounts Held Through Agents or Nominees

You cannot dodge the filing requirement by putting someone else’s name on the account. If the account’s owner of record is your agent, nominee, or attorney acting on your behalf, you have a financial interest in that account.⁴ The rule looks at who holds the real economic power over the funds, not whose name the bank has on file.

This applies whether the intermediary is a person or an entity. A common scenario: you hire a foreign financial advisor who opens an account in their own name but manages it at your direction and for your benefit. That account is reportable on your FBAR. Substance controls over form, and people who use nominees to deliberately conceal ownership face the steepest penalties the statute allows.

When a Financial Interest Actually Triggers Filing

Having a financial interest only creates a filing obligation if the account itself qualifies as a foreign financial account and the aggregate value threshold is met. The category covers bank accounts, brokerage accounts, mutual funds, and similar accounts maintained at financial institutions physically located outside the United States, plus foreign life insurance and annuity contracts with a cash surrender value.² Whether the account generated any taxable income during the year is irrelevant. A dormant account with a zero return still counts toward the $10,000 aggregate threshold.

Cryptocurrency sits in an odd spot. Under FinCEN Notice 2020-2, a foreign account holding only virtual currency is not currently reportable on the FBAR, though FinCEN stated its intent to amend the regulations to include virtual currency accounts in the future.⁵ If a foreign account holds both cryptocurrency and traditional reportable assets, the account is still reportable. The rules here can shift quickly, so check FinCEN’s guidance before filing.

What Happens If You Get It Wrong

FBAR penalties are steep enough to justify getting the financial-interest analysis right the first time. For non-willful violations, meaning you did not intentionally ignore the filing requirement, the maximum civil penalty is $16,536 per report as of the January 2025 inflation adjustment.⁶ The Supreme Court clarified in 2023 that this penalty applies per unfiled report, not per unreported account.⁷ No penalty applies if the violation was due to reasonable cause and you properly reported the account balance.⁸

Willful violations carry a civil penalty of the greater of $165,353 or 50 percent of the account balance at the time of the violation, applied per account and per year.⁶ The willfulness standard does not require proof that you set out to break the law. Courts have found willfulness where a person knew about the reporting requirement and consciously chose not to comply, or where they were reckless in ignoring it. A willful FBAR violation can also result in criminal prosecution, with fines up to $250,000 and up to five years in prison; if the violation is part of a broader pattern of illegal activity involving more than $100,000 over a twelve-month period, those maximums rise to a $500,000 fine and ten years.⁹

If your analysis of who “owns” a foreign account is at all uncertain — especially with layered entities, discretionary trusts, or nominee arrangements — the cost of a professional opinion is small compared with the downside of guessing wrong.

1
eCFR. 31 CFR 1010.350 – Reports of Foreign Financial Accounts
2
Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR)
3
Financial Crimes Enforcement Network. Filing for Spouse
4
Financial Crimes Enforcement Network. BSA Electronic Filing Requirements for Report of Foreign Bank and Financial Accounts (FinCEN Form 114)
5
Financial Crimes Enforcement Network. Notice 2020-2 – Report of Foreign Bank and Financial Accounts (FBAR) Filing Requirement for Virtual Currency
6
eCFR. 31 CFR 1010.821 – Penalty Adjustment and Table
7
Justia. Bittner v United States, 598 US (2023)
8
Office of the Law Revision Counsel. 31 USC 5321 – Civil Penalties
9
Office of the Law Revision Counsel. 31 USC 5322 – Criminal Penalties