This is a somewhat technical question and I'm hoping someone here has actual experience in handling this; it should be a quite common situation in the US, but I couldn't find any direct information:

Background: The typical situation would involve a nonresident alien (with no US connection whatsoever) who dies outside the US. All the assets of decedent's estates are also located outside the US. The decedent's will (or applicable local law) provides that (all or part of) the estate go to a heir/beneficiary who is a US taxpayer. Assume the amounts involved are high enough to exceed the reporting thresholds for all potential filings.

In most countries, the executor of/attorney for the foreign estate would administer the estate by (among other things) opening a back account, depositing in that account the proceeds from the sale of estate assets, pay local taxes and expenses and distribute the balance to the beneficiaries, including our US taxpayer. As a beneficiary of the estate, the US taxpayer would normally have whatever rights are available to a beneficiary under local law, but would not have signatory authority and direct control of the bank account.

Obviously, the distribution received by the US taxpayer has to be reported on Form 3520. But what about the account itself? Even if the whole process ends within the same taxable year and the account is closed, it would seem that, because at some point the value of the account (net of taxes and expenses) allocable to the US taxpayer was sufficiently high - that fact would trigger reporting requirements for both FBAR/From 114 and Form 8938.

Is that the correct outcome? Is there some exception/exclusion I'm missing?


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