Estate planning for US expats: FBAR and FATCA compliance guide
Estate planning gets complicated when your client lives abroad. American expats face tax rules that don't stop at the border. Two reporting requirements—FBAR and FATCA—can destroy even well-planned estates if ignored.
Lawyers handling immigration, estate planning, or international business cases need to know these rules. Miss them, and your clients face penalties that eat into their estates before heirs see a dime.
Why these reports matter for your clients' estates
The US taxes its citizens on all income and assets worldwide. Living in Paris or Singapore doesn't change that.
Your clients must report during their lives. When they die, their executors inherit the same burden.
The penalties are serious:
- FBAR violations: $10,000 per account for honest mistakes. Up to 50% of the account balance if the IRS thinks it was intentional
- FATCA violations: Start at $10,000, climb to $50,000, plus a 40% penalty on unreported income
Here's what many lawyers miss: these penalties don't disappear when your client dies. The estate pays them. Beneficiaries get what's left.
If you find unreported accounts during estate planning, fix it fast. The streamlined filing compliance program lets clients catch up before the IRS comes knocking. It's the best option for non-willful violations.
FBAR vs FATCA: What's the difference?
Most clients—and many lawyers—confuse these two. They're separate requirements with different rules:
| Requirement | FBAR (FinCEN 114) | FATCA (Form 8938) |
| Who gets it | FinCEN (Treasury) | IRS |
| When you file | $10,000 total in foreign accounts | $200,000-$600,000 for expats |
| What you report | Foreign bank accounts | All foreign financial assets |
| Deadline | April 15 (auto-extends to Oct 15) | Due with tax return |
| Penalties | $10,000 non-willful; 50% willful | $10,000-$50,000 + accuracy penalties |
Many clients need to file both forms. Hitting the $10,000 FBAR limit doesn't mean you skip Form 8938 if assets are higher.
Form 8938 filing requirements
Form 8938 applies when foreign financial assets cross certain dollar amounts.
The thresholds change based on where your client lives and how they file:
| Filing status | Living abroad (year-end) | Living abroad (any time) | Living in the US (year-end) | Living in the US (any time) |
| Single / Married Filing Separately | $200,000 | $300,000 | $50,000 | $75,000 |
| Married Filing Jointly | $400,000 | $600,000 | $100,000 | $150,000 |
Notice the difference? Expats get much higher thresholds than people living in the US.
What assets count
Form 8938 covers more than bank accounts. Your client reports:
- Foreign brokerage and investment accounts
- Stock in foreign companies
- Partnership interests in foreign businesses
- Foreign pension and retirement accounts
- Foreign mutual funds (these often trigger PFIC tax treatment—even more complicated)
- Interests in foreign trusts
- Foreign life insurance with cash value
Even if your client doesn't own the account outright, they might still need to report it. Signing authority on a company account? That can trigger filing requirements.
Common estate planning scenarios
Here's how this plays out in real cases:
| Client scenario | FBAR required? | Form 8938 required? | What this means |
| Single expat with $250K in a French bank | Yes | Yes | Must file both forms |
| Single expat with $15K in UK account | Yes | No | Only FBAR required |
| Married expats with $500K investments abroad | Yes | Yes | Both forms of estate plan must address compliance |
| US resident with $80K in foreign stocks | Yes | Yes | Lower thresholds apply at home |
| Signing authority on $2M company account | Yes (usually) | Maybe | Even without ownership |
What happens to non-compliant estates
The US estate tax hits all worldwide assets when a US citizen dies. The 2026 exemption protects properly reported wealth.
But unreported foreign accounts create problems:
- Executors may face personal liability when they find unreported accounts
- Underreported estate values trigger accuracy penalties and longer audits
- Foreign banks now report US account holders under FATCA—the IRS finds out anyway
- Penalties reduce what beneficiaries receive
The compliance record you build today protects your client's heirs tomorrow.
Special estate planning issues
Foreign Trusts
When a US citizen creates a foreign trust, IRS rules usually treat it as if the person still owns everything.
This triggers:
- Form 3520 and Form 3520-A reporting
- The trust interest still counts for Form 8938
- Extra IRS scrutiny on "international planning techniques."
Non-US spouses
Leaving assets to a spouse who isn't a US citizen? You lose the unlimited marital deduction.
This creates estate tax exposure. It gets worse if the deceased spouse never reported foreign accounts.
A QDOT (Qualified Domestic Trust) can delay the tax. But it only works when all assets—including every foreign account—are properly disclosed. Find an unreported account later? The whole structure can fall apart.
Your due diligence checklist
Lawyers who miss FBAR and FATCA requirements risk malpractice claims.
Ask every expat client about:
- All foreign financial accounts (any size)
- Foreign business interests
- Foreign retirement and pension plans
- Signing authority over accounts they don't own
- Foreign mutual funds and investments
Check their old tax returns. Look for the FATCA filing requirement box on Form 1040. If they had foreign assets, but the box isn't checked, something's wrong.
How to fix past mistakes
When you discover unreported accounts during estate planning:
- Don't wait - The problem won't fix itself
- Document everything - Get copies of filed FBARs and Forms 8938 to see what's missing
- Bring in a tax professional - Estate planning and tax compliance connect for international clients
- Use streamlined procedures - They work best before the IRS contacts your client
- Educate the executor - Make sure they know these rules continue after death
The streamlined filing compliance program lets clients file three years of amended returns and six years of late FBARs. Penalties are reduced for honest mistakes.
The 2026 compliance environment
FATCA keeps getting stronger. The IRS has information-sharing deals with governments worldwide.
Foreign banks automatically report US account holders now. This creates a paper trail. The IRS already knows about many foreign accounts.
For lawyers, this means: the window to quietly fix problems is closing.
Clients who use streamlined filing compliance before the IRS contacts them pay much less. Wait until you get a letter? The penalties multiply.
Bottom line for legal professionals
Estate planning for Americans abroad isn't just wills and trusts anymore. You need to know:
- When FBAR filing is required (any aggregate balance over $10,000)
- How Form 8938 thresholds work ($200,000-$600,000 for expats)
- What happens when accounts aren't reported (penalties that reduce estates)
- How to fix past non-compliance (streamlined procedures)
Get this right, and you protect your clients and their families.
Get it wrong, and you're looking at malpractice exposure while their estates pay penalties they could have avoided.
