Foreign Grantor Trust Reporting: Who Files What, and When

A Foreign Grantor Trust (FGT) can let a parent outside the United States pass wealth to children and grandchildren who live here, often with favorable U.S. income and estate tax treatment. The tax benefits get most of the attention. The paperwork gets less, and that’s where families tend to get hurt.

U.S. law requires detailed reporting on foreign trusts, and the penalties apply even when no tax is owed. A U.S. child who receives a $200,000 distribution and doesn’t report it can face a $70,000 penalty on money that wasn’t taxable to begin with.

This guide is written for the most common FGT family: a parent abroad who created the trust, and children or grandchildren who are U.S. citizens or residents. It covers which forms apply, who files each one, when they’re due and what happens when the facts change.

The Forms at a Glance

Here are the U.S. reporting forms that come up most often with a Foreign Grantor Trust. All figures come from the IRS; whether each one applies to your family depends on the facts.

Form	Who files	When it applies	Due	Penalty if missed
Form 3520, Part III	Each U.S. beneficiary	Receives a distribution from a foreign trust	April 15 (Oct. 15 with Form 4868)	Greater of $10,000 or 35% of the distribution
Form 3520, Part IV	U.S. recipient	Gifts or bequests from a nonresident individual or foreign estate over $100,000 in a year	April 15 (Oct. 15 with Form 4868)	5% of the gift per month unreported, up to 25%
Form 3520-A	The U.S. owner, who is responsible for making sure it’s filed for the foreign trust	Only when a U.S. person is treated as an owner of the trust	March 15 (6-month extension with Form 7004)	Assessed against the U.S. owner: greater of $10,000 or 5% of the trust assets treated as U.S.-owned
FBAR (FinCEN Form 114)	U.S. person with a financial interest in or signature authority over foreign accounts	Foreign accounts total more than $10,000 at any time in the year	April 15 (automatic extension to Oct. 15); filed with FinCEN	Separate penalties apply
Form 8938	U.S. taxpayer with specified foreign financial assets	Assets over $50,000 at year-end or $75,000 at any time (single filer living in the U.S.; higher for joint filers and those abroad)	With the income tax return	Separate penalties apply

Two points about the table. First, these are information returns. Filing them doesn’t mean you owe tax, and not owing tax doesn’t excuse you from filing them. Second, the deadlines in the table are for individuals who use the calendar year. U.S. citizens and residents living abroad generally get until June 15 to file Form 3520, according to the IRS.

Who Files Depends on Who the Grantor Is

The forms that apply to your family turn on one question: is the person treated as owning the trust for U.S. tax purposes a U.S. person or a foreign person?

When the grantor is a foreign parent. In the typical FGT, a parent who isn’t a U.S. person creates and funds the trust, and the trust is set up so that its income is attributed to that parent during their lifetime. In that case, the trust usually doesn’t have a U.S. owner, so Form 3520-A generally isn’t required. The main obligation falls on the U.S. children or grandchildren: each one who receives a distribution reports it on Form 3520, Part III.

When a U.S. person is treated as an owner. That can happen when the grantor moves to the United States and becomes a U.S. tax resident, or when a U.S. family member adds money to the trust. Once there’s a U.S. owner, that owner is responsible for making sure Form 3520-A is filed for the trust each year, and the penalty for a missed or incomplete filing falls on the U.S. owner. The U.S. owner must also complete Part II of Form 3520. If the trust doesn’t file, the IRS requires the U.S. owner to attach a substitute Form 3520-A to their own Form 3520. Our post on using Foreign Grantor Trusts before becoming a U.S. resident explains why timing matters if a move is on the horizon.

When the grantor dies. The trust generally stops being a grantor trust. From then on, distributions to U.S. beneficiaries can carry out taxable income, and reporting gets more involved. Planning for that moment ahead of time is one of the main differences between Foreign Grantor Trusts and U.S. trusts.

The Beneficiary Statement Most Families Don’t Know to Ask For

When a foreign grantor trust makes a distribution to a U.S. beneficiary, the trust should give that beneficiary a Foreign Grantor Trust Beneficiary Statement. It’s a short document from the trustee confirming that the trust is treated as owned by the foreign grantor.

That statement changes how the distribution is treated. Under the IRS instructions for Form 3520, a beneficiary with a complete statement treats the distribution for income tax purposes as if it came directly from the owner, the foreign parent. The beneficiary attaches the statement to Form 3520 instead of completing the rest of Part III for that distribution.

Without the statement, the beneficiary may have to use a default calculation on Schedule A of Form 3520. Under that method, part of the distribution can be taxed as ordinary income, with an interest charge added. The same money, reported without the right paperwork, can produce a tax bill that never should have existed.

The practical step is simple: ask the trustee for the statement every year a distribution is made, and keep it with your tax records. If the trustee is outside the United States, make sure they know the statement is required before the first distribution.

A Hypothetical Example

Here’s how this works in practice. The following is a hypothetical, not a client story.

Elena is a U.S. citizen who lives in Miami. Her father, a citizen and resident of another country, created a revocable trust there years ago, and it qualifies as a Foreign Grantor Trust. In June 2026, the trust distributes $200,000 to Elena.

• What Elena files. She reports the distribution on Form 3520, Part III, by April 15, 2027, the same day as her income tax return. If she extends her income tax return with Form 4868, her Form 3520 is extended to October 15 as well.
• What makes it go smoothly. The trustee sends her a Foreign Grantor Trust Beneficiary Statement. She attaches it, and the distribution is treated as coming directly from her father. Under that treatment it’s generally not taxable income to her.
• What goes wrong without the statement. If the trustee never sends one, Elena may have to use the default calculation, and part of the $200,000 could be taxed as ordinary income plus an interest charge.
• What goes wrong if she doesn’t file. The penalty for an unreported distribution from a foreign trust is the greater of $10,000 or 35% of the distribution. On $200,000, that’s $70,000.

Elena may also have FBAR or Form 8938 obligations if she holds accounts or assets abroad. Those depend on her own accounts and assets, separate from the trust distribution.

Gifts From a Foreign Parent Are Reported Too

Not every transfer runs through a trust. If your parent gives you money directly, you report it on Form 3520, Part IV, once gifts and bequests from a nonresident individual or foreign estate exceed $100,000 in a year. Above that threshold, the IRS asks you to list each gift over $5,000.

Gifts from a foreign corporation or partnership have a much lower threshold: $20,573 for 2026, adjusted each year for inflation. The IRS can also recharacterize those payments, so they deserve a closer look.

The penalty for not reporting a foreign gift is 5% of the gift’s value for each month it goes unreported, up to 25%, unless you can show reasonable cause.

Note one distinction from the IRS instructions: a distribution from a foreign trust goes in Part III as a distribution, even when it’s a gift in substance. Part IV is for gifts made directly by a foreign person.

When to Get Help

Foreign trust reporting depends heavily on the trust document, the trustee’s records and each family member’s own tax situation. A few situations call for advice before you file:

• A distribution is coming and you’ve never received a beneficiary statement.
• The grantor has moved, or is planning to move, to the United States.
• The grantor has died, and the trust is now making distributions under different rules.
• Prior years were missed. The penalties grow over time, and there are procedures for coming back into compliance that are worth discussing with an attorney before you file anything.

Coordinating with the trustee and the family’s advisors abroad matters too, since the trust’s home country will have its own rules. Our post on how Foreign Grantor Trusts fit into a cross-border estate plan covers that side of the planning, and the Foreign Grantor Trusts section of our Wills & Trusts page explains how these trusts are set up.

Before the Next Distribution

If your family has a Foreign Grantor Trust, or you’re considering one, set up a consultation. One of our attorneys will review how the trust is structured, who in your family has a filing obligation and what to put in place before the next distribution. You can also contact us directly.

Frequently Asked Questions