What are the foreign asset reporting requirements for Texas residents?

What is the FBAR (FinCEN Form 114)?

The FBAR, formally called the Report of Foreign Bank and Financial Accounts, is filed annually with the Financial Crimes Enforcement Network (FinCEN), a bureau of the US Treasury Department. It is not filed with a tax return; it is submitted separately through a dedicated electronic filing system.

The FBAR applies to US persons who have a financial interest in, or signature authority over, one or more foreign financial accounts if the aggregate value of those accounts exceeded $10,000 at any point during the calendar year. The $10,000 threshold is measured across all foreign accounts combined, not per account.

Foreign financial accounts subject to FBAR reporting include bank accounts, brokerage accounts, mutual funds, and certain other account types held at institutions located outside the United States. The filing is due April 15 each year, with an automatic extension to October 15.

What is Form 8938 (FATCA)?

Form 8938, Statement of Specified Foreign Financial Assets, was created under the Foreign Account Tax Compliance Act (FATCA). Unlike the FBAR, Form 8938 is filed with the federal income tax return and submitted to the IRS.

Form 8938 covers a broader category of assets than the FBAR, including foreign financial accounts, interests in foreign entities, and other specified foreign financial assets. The thresholds for Form 8938 vary based on the taxpayer's filing status and whether they reside in the United States or abroad, and are generally higher than the FBAR threshold.

A taxpayer who holds foreign financial accounts may be required to file both the FBAR and Form 8938. The two forms have overlapping but distinct coverage, so satisfying one does not satisfy the other.

How do FBAR and Form 8938 compare?

Filed with: FBAR: FinCEN (separate electronic filing) | Form 8938: IRS (attached to tax return) Threshold: FBAR: $10,000 aggregate in foreign financial accounts at any point during the year | Form 8938: Varies by filing status and residency; generally higher Asset types covered: FBAR: Foreign financial accounts (bank, brokerage, certain others) | Form 8938: Foreign financial accounts plus foreign entities, contracts, and other specified assets Due date: FBAR: April 15 (automatic extension to October 15) | Form 8938: With the federal income tax return Penalty exposure: Both carry significant civil penalties; willful violations of the FBAR carry higher maximum penalties

What foreign assets must be reported and which are excluded?

The FBAR applies to financial accounts held at foreign financial institutions. Real property held directly in the owner's own name (not through an account) is not reportable on the FBAR. However, a foreign bank account used to collect rent from foreign property, or a foreign brokerage account, would be reportable.

Form 8938 covers a wider range of assets, including interests in foreign entities such as foreign corporations, partnerships, and trusts, as well as foreign financial accounts. Interests in a foreign estate, a foreign pension plan, and certain foreign insurance contracts may also require disclosure.

Ownership interests held through structures such as a Mexican fideicomiso raise specific reporting questions. Whether the fideicomiso interest is a reportable foreign account, a foreign trust, or some other category depends on the specific terms of the arrangement. These classifications have compliance implications and should be reviewed with a qualified attorney or tax advisor.

How does foreign asset reporting connect to estate planning?

Foreign asset reporting and estate planning intersect at several points. Unreported foreign accounts and assets complicate estate administration because the executor or trustee must locate and account for all assets, including those held abroad, and must address any pre-death reporting failures.

For families with Mexican or other foreign assets, identifying every foreign account and asset is a required first step in estate planning. The attorney needs to know what is held, how it is titled, what value it represents, and whether reporting obligations have been met, before any plan can be designed around those assets.

For estates that may exceed the federal estate tax exemption threshold, foreign assets are included in the gross estate for federal estate tax purposes. Knowing the full picture of foreign asset ownership is necessary for accurate estate tax planning.

When reporting obligations have not been met in prior years, there are IRS programs for voluntary disclosure that can reduce or limit penalties. Whether and how to use those programs is a decision that should be made with qualified legal and tax advice, not avoided.

When to speak with a Houston attorney about foreign asset reporting

This article provides general information only and does not constitute legal advice. FBAR and FATCA rules involve federal law and are subject to change; specific thresholds, filing procedures, and penalty structures should be verified with a qualified attorney or tax professional.

The estate planning attorneys at Edison Legal work with Houston-area clients on the US-law aspects of cross-border planning, including the identification of foreign reporting obligations as part of the estate planning intake process. Request a planning consultation to discuss your situation.