Is filing FBAR required if I inherited a Japanese foreign bank account but it is not under my name?

[oboero2]

Is filing FBAR required if I inherited a Japanese foreign bank account but the bank account is not under my name?

Since Japan do not allow US residents to own a Japanese bank account, all the inherited money in the bank account will be cashed out to me and the bank account will be closed. The amount is over $10k. So although I inherited the money in the account, the account was never in my name. As a US citizen, would I still have to file FBAR in this case?

[tagteam]

@pk?

[pk]

@oboero2 ,  assuming that 

(a) you are US person ( citizen/ GreenCard / Resident for Tax purposes ) with US tax home

(b) having been endowed the contents of foreign bank account

 the question I have on this  is the actual language  used in the  will / Estate disposition document . of the decedent -- for example does  it say   "I leave  to  XXX  the contents of this account # YYYYY " or does it say  "I leave this account # YYYYY to XXX ".    Also  were you a signatory ( nominee account ) of the  bank account  but did not own and/or operate the account?

Generally, if you did not own and/or have signature authority over a bank account then is outside the FBAR.    On the other hand, if the bank account had your name associated with it at anytime during the tax year then FBAR comes into effect for you.

Does this make sense ?   Is there more I can do for ?

pk

[oboero2]

Thank you for your reply @pk 

There was no will, but since I am the only child, (and my parent is divorced)according to Japanese law I will be the only legal heir.

But Japanese bank is strict with non-Japanese residents that they do now allow me (a US citizen and US resident) to add my name to my parent’s bank account, and they also do not allow me to directly transmit the money in my parent’s Japanese bank account to my US bank account. In Japan, banks will freeze the account as soon as they are notified of the owner’s passing and they will eventually close the account once all the funds are taken out. So my options are:

1) Cash out all the money in my parent’s bank account (I can do this since I found the passcode for ATM in my parent’s notepad) before bank freezes the account and just keep the money in forms of cash in Japanese yen in my Japanese house. And then tell the bank of my parent’s passing and they will freeze and then close the account. (This sounds a bit grey but I confirmed and is perfectly legal in Japan since I’m the only heir). So the account will be under my parent’s name, not my name.

2) Since I can’t directly transfer the fund in Japan but I am the legal heir of the account, I will need to write a form granting power of attorney to someone with Japanese residency, so Japanese bank will first transfer all the funds to this proxy’s Japanese bank account. The proxy will then send the funds to my US bank account.

So, would either 1 or 2 trigger FBAR reporting requirement? The basic law in Japanese bank does not seem to give much authority to US residents, but since I am inheriting the funds in the Japanese account, I am confused if the signature authority part still applies. Thank you so much!!

[pk]

@oboero2 , I understand the conundrum you are in. My suggestion  would be the following :

(a) since you are beneficial  owner  ( even if there is no will  ), it would be legally correct  for you to file  an FBAR using your parent's bank account number -- while this is not required  but it is in the spirit of the  FBAR requirement.  I say also because , no matter which path you follow, the transfer in  of the amount to your US bank will raise an SAR ( Suspicious  Activity Report  ) and then generally nothing happens to it.  This way in case of query, you are covered .  It is not a tax  even.

 You al.so said  " in my house in Japan " -- does that mean the house  of your demised parent or your own house  in  Japan ?   Because when you sell that ( if and when ), you  may need to pay capital taxes to USA.

Have I answered your query  ( perhaps in a round about way )?

Is there more I can do for you ?

pk

[oboero2]

Thank you so much for your detailed reply @pk 

Would taking path 1 also raise SAR even though there will be no money transfer to my US bank? Or are you saying reporting foreign inheritance to IRS by filing form 3520 (since the amount is over $100,000, I am required to file this) itself is already enough to raise an SAR?

I also did inherit a house in Japan but these is no plan to sell it, so that part should be simple.

[pk]

@oboero2 ,  thank you for your response 

Let me Clarify  :

SAR is raised by your US bank on any foreign  transfers  ( in or out )  and dealt with by the bank.  You do not have any action here

FBAR regs come into play for any Finacial accounts that you own and/or have signature authority.  Thus if you have a Foreign account or by virtue of inheritance , you become the owner/signatory of your Parent's  bank account, you will need to file a form 114  ( FBAR at FinCen.gov -- it is only on-line filing , due date same as return filing date )

Form 3520 is filed  directly to IRS  ( download the form from www.irs.gov and it shows the address where it should be mailed ) -- not part of your return . Any time you receive =>US100,000  from a Foreign person / Estate / Trust, you must file this form.  No tax implication.

Form 8938 -- FATCA form covers all other  foreign assets ( liquid and semi-liquid ) , except for real=estate and needs to filed along with your return.  Again it generally has NO tax implications.

I hope this  answers  your query.  In case you have more questions on this please feel welcome to add to this thread and I will circle back