United States

FBAR and FATCA: What Americans Must Report When Inheriting in Spain

Published April 2025 · 11 min read · By International Inheritance Spain

US citizens, resident aliens and green card holders are subject to US tax and reporting obligations on their worldwide income and assets — including assets inherited abroad. When you inherit Spanish bank accounts, investments or other financial assets, several US reporting obligations may arise independently of the Spanish inheritance process. Failure to comply carries severe penalties.

Form 3520: Reporting a Foreign Inheritance

IRS Form 3520 (Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts) must be filed by a US person who receives a bequest or inheritance from a non-US person (foreign estate or non-US citizen/resident) if the total value exceeds $100,000 in a calendar year.

Key points:

• If your Spanish inheritance exceeds $100,000 (approximately €92,000 at current rates), Form 3520 must be filed
• The form is due by April 15 of the year following the year you received the inheritance (or the extended due date if you file for an extension)
• The penalty for failure to file is the greater of $10,000 or 35% of the gross reportable amount — a potentially enormous penalty
• If the deceased was a US citizen or green card holder, Form 3520 is generally not required — but other forms may be

FBAR: Reporting Foreign Bank Accounts

The Foreign Bank Account Report (FinCEN Form 114, commonly called FBAR) must be filed by any US person who has a financial interest in, or signature authority over, one or more foreign financial accounts if the aggregate maximum value during the calendar year exceeds $10,000.

When you inherit a Spanish bank account:

• From the moment the account passes to you (or you become a beneficial owner), it counts toward your FBAR threshold
• FBAR is filed electronically with FinCEN by April 15 (automatic extension to October 15)
• Willful failure to file: penalty up to the greater of $100,000 or 50% of the account balance per year; non-willful: up to $10,000 per year
• Spanish accounts in the process of being inherited may create ambiguity about the date of "financial interest" — document everything carefully

FATCA: Form 8938

FATCA (Foreign Account Tax Compliance Act) requires US taxpayers to report specified foreign financial assets on Form 8938 (Statement of Specified Foreign Financial Assets) if they exceed threshold amounts:

• US residents: $50,000 at year end or $75,000 at any point during the year (double for married filing jointly)
• Non-US residents: $200,000 at year end or $300,000 at any point during the year
• Form 8938 is filed with your regular federal income tax return
• Penalty for failure to disclose: $10,000, rising to $50,000 for continued failure after IRS notice
• FBAR and Form 8938 are separate — filing one does not satisfy the other

What If the Inherited Account Has Undisclosed History?

A common situation: a US heir inherits a Spanish bank account that the deceased (a non-US person) held for decades. The heir was unaware of the account. Once the inheritance is accepted and the account passes to the US heir, the heir has current reporting obligations going forward — but does not inherit the deceased's past reporting failures (assuming the heir is a new account holder).

However, if the heir has had an informal interest in the account during their lifetime (e.g., as an authorised signatory), there may be retroactive FBAR obligations. This requires careful legal analysis.

Spanish Inheritance Tax as US Tax Credit

Spanish ISD paid on inherited Spanish assets may be claimed as a foreign tax credit (Form 1116) against US federal income tax, or potentially as a deduction. For estate tax purposes, foreign estate tax paid (if the deceased was a US person) can be credited against US federal estate tax under IRC §2014.

The interaction between Spanish ISD and US federal tax is complex and requires coordination between your US CPA or tax attorney and us.

Qualified Disclaimer: The US Tool for Renouncing

A US heir who does not wish to accept a Spanish inheritance (perhaps because debts exceed assets, or tax costs are too high) can execute a Qualified Disclaimer under IRC §2518 in the US and coordinate it with a Spanish renuncia (renunciation). The timing requirements are strict: the disclaimer must be made within nine months of the date of death, while the Spanish renunciation has a six-month deadline. These two processes must be carefully coordinated.