Q: Hi, I have a friend who is a us resident and her dad wants to Transfer all his money which is in banks overseas

A: I suggest your friend speak to a tax attorney directly before this money is transferred so that she can discuss specifics and receive specific advice about what obligations she will have, as the answers below are very general and do not take into account a myriad of other factors that may add additional reporting requirements.

Often parents (in the US and abroad) will add their children's names as joint owners of their bank accounts while they are alive, even though it is the intention of the parent and the child that the parent is the only one entitled to use the account. Essentially the parent is the only owner but they have added their child's name to the account to allow for easier inheritance and to allow their child to access the account for the parent's benefit if the parent becomes unable to care for himself/herself. If this is what is happening, the daughter would not have to report this as a gift (until her parent passes away or completely gives the account to her) and would not have to report the earnings on the account as income. However, as long as the account remains outside the United States, she would have to file an FBAR (FinCEN Form 114) each year to report her signature authority on the account and she would have to provide information about the highest account balance within the account. She would also likely have to file an IRS Form 8938 with her tax return each year to report this account.

If he transfers the money to her right away as a gift (or a gift in lieu of inheritance), she would have to file an IRS Form 3520 to report her receipt of this gift. If she keeps the money overseas, even for a day, she may have a requirement to file an FBAR and Form 8938. If she keeps the money overseas for any period of time and it generates income, then she will need to include any income on her tax return. However, income generated overseas is not always taxed the same way it would be if it was generated in the US (prime examples are mutual funds and life insurance), so she should really seek a tax professional experienced with overseas income and assets to review the type of earnings with her (or even to determine if there are taxable earnings, such as with a life insurance policy or mutual fund) to determine the proper tax treatment.

A: This happens often and there may not be anything wrong with it. Consult a tax attorney knowledgeable in international tax matters and underlying documentation in light applicable tax laws and the Bank Secrecy Act. The information presented herein is for general purposes only. It is not intended to, and may not be construed as legal, tax or accounting advice. Neither is it intended for solicitation purposes. For specific advice, please consult an appropriate attorney in person. Good luck. Zaher Fallahi, Tax Attorney, CPA.