SusanY1
Expert Alumni

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If a US person owns the foreign life insurance policy, there are reporting requirements during the years of ownerships, as many foreign policies are considered investment vehicles (and often Passive Foreign Investment Companies or "PFICs") which requires filing Form 8621.

However, if the US person is simply the contractually named beneficiary of the policy, no special reporting is required, including no requirement to file Form 3520.  Insurance proceeds are neither gifts/bequests nor distributions from trusts unless the policy is considered "non-compliant"  You may need to consider consulting with a professional near you with expertise in that subject matter if you're not sure. 

Bonus payments paid to the beneficiary at death of the insured are treated as life insurance proceeds.  Bonus payments made to the owner while the insured is still alive are income. 

Keep your documents showing where the funds came from with your tax returns and other important records in case of an inquiry regarding the source of funds deposited into the foreign bank account, but that sort of inquiry is not a common occurrence. 

If you're more comfortable filing the form rather than leaving any room for questions, you may certainly do so.  If that is the case, I would use the section of the form for bequests and not distributions from a trust.  This is Part IV, Line 54, on page 6 of the form. 

@anders650 

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