Foreign gifts and trusts reporting

Form 3520 is an IRS information return that reports transactions with foreign trusts and receipt of large foreign gifts or inheritances — it's purely disclosure, filed separately from Form 1040, and doesn't calculate or trigger any tax by itself. That last point trips people up: filing a Form 3520 for a foreign gift doesn't mean you owe tax on it, since foreign gifts and inheritances generally aren't taxable income in the first place. See the full Form 3520 guide for how the reporting and tax questions are actually separate.

Four separate triggers each independently require Form 3520: creating or transferring property to a foreign trust, being treated as the owner of a foreign trust under the grantor trust rules (even with zero distributions that year), receiving any distribution from a foreign trust, or receiving foreign gifts or bequests above the reporting threshold. Any one of these on its own is enough — you don't need all four, and there's no minimum dollar amount for the trust-distribution trigger the way there is for gifts. See the full breakdown of all four filing triggers to check which applies to your situation.

Yes, once it crosses $100,000 — bequests from a nonresident alien individual or a foreign estate are aggregated with any other gifts from the same source during the year, and once the combined total passes $100,000, Form 3520 reporting is required even though the inheritance itself typically isn't taxable. Related gifts and bequests get aggregated specifically to prevent someone from splitting a large inheritance into smaller pieces to dodge the threshold. See the full foreign inheritance reporting guide for how this aggregation rule works in practice.

It's the Form 3520 reporting threshold for gifts or bequests from a nonresident alien individual or a foreign estate — more than $100,000 in a year triggers the filing requirement, and once you cross it, every individual gift or bequest over $5,000 needs to be separately itemized on the form. A different, much lower threshold applies to gifts from foreign corporations or foreign partnerships instead (a few thousand dollars, adjusted annually), so the $100,000 figure specifically applies only to gifts from individuals and estates, not entities. See the full Form 3520 gift threshold rules for both threshold amounts and how the itemization requirement works.

Form 3520-A is a separate, trust-level annual information return filed by a foreign trust itself (or on its behalf) whenever it has at least one US owner — distinct from Form 3520, which the US person files to report their own specific transactions with the trust. If the foreign trust doesn't file its own Form 3520-A, the US owner is required to attach a substitute version to their own Form 3520, which means the reporting burden effectively shifts back to the US person when the foreign trustee doesn't cooperate. See the full comparison of Form 3520 versus Form 3520-A for who files what and when.

A trust is "foreign" if it fails either of two tests: the court test (a US court must be able to exercise primary supervision over the trust's administration) or the control test (US persons must control all substantial decisions) — failing just one of the two, not both, is enough to make it foreign. This definition catches more than obviously "foreign-sounding" arrangements: a trust set up domestically but administered with a foreign trustee making key decisions can still fail the control test and count as foreign. See the full foreign trust definition and reporting obligations for exactly how each test is applied.

It depends entirely on whether it's a grantor or nongrantor trust: if you're treated as the owner under the grantor trust rules, you report all of the trust's income, deductions, and credits directly on your own Form 1040 every year, even without receiving any distributions, while a nongrantor trust's beneficiaries are only taxed on what they actually receive. Accumulated income distributed later from a nongrantor trust can trigger the "throwback tax," which taxes that income as though it had been distributed in the earlier years it was actually earned, plus an interest charge for the deferral — a mechanism specifically designed to remove the tax benefit of stockpiling income offshore before distributing it. See the full foreign trust taxation rules for how grantor status is determined and how the throwback tax is calculated.

Possibly — a Canadian TFSA specifically sits in genuinely unresolved territory: the IRS hasn't issued TFSA-specific guidance, and practitioners are split between treating it as a foreign grantor trust (requiring Form 3520 and 3520-A) or as a simple custodial account exempt from that requirement. Given the penalties for getting this wrong if the conservative position turns out to be correct, most cross-border tax practitioners recommend filing the foreign-trust paperwork defensively rather than betting on the more favorable interpretation. See the full TFSA tax implications for US expats for both sides of this unsettled question.

No — a foreign inheritance is generally not taxable income for US federal income tax purposes, regardless of its size, though it may still need to be reported on Form 3520 once it crosses the $100,000 threshold. What is taxable is any income the inherited assets generate after you receive them — interest, dividends, rent, capital gains, or PFIC distributions all become taxable going forward, even though the inheritance itself wasn't. See the full foreign inheritance tax guide for how receiving the inheritance and the income it later produces are treated completely differently.

Generally not through the usual mechanisms — since a foreign inheritance itself isn't taxable US income, there's typically no US income tax on the inheritance for a foreign estate or inheritance tax to offset, and this kind of tax isn't automatically creditable as a foreign income tax the way tax on foreign wages or investment income would be. This surprises people who assume the Foreign Tax Credit works the same way here as it does for income taxes — it doesn't, because the FTC is built around double taxation of income, and an inheritance generally isn't income to begin with. Each situation genuinely needs separate analysis, since a country's "inheritance tax" can sometimes overlap with an income-tax-like component depending on how it's structured. See the foreign inheritance tax guide for how to evaluate a specific foreign inheritance tax you've paid.

Generally no — US estate tax is assessed against the decedent's estate before assets are distributed, not against the heir personally, so a foreign (non-US) heir receiving a distribution from a US citizen's estate doesn't owe US income tax on the inheritance itself, exactly like a US-person heir wouldn't. For 2026, the federal estate tax exemption sits at $15 million per person, now made permanent under the 2025 tax reform law, so most estates never owe federal estate tax at all regardless of who inherits. A foreign heir also isn't a "US person," so the Form 3520 reporting obligation that would apply to a US heir receiving a large gift or bequest doesn't apply to them either — see the estate tax rules for nonresident situations for how the estate-level tax itself is calculated.

Nowhere — an unused foreign tax credit carryover is a personal tax attribute of the taxpayer who generated it, and it generally terminates when they die rather than passing to their estate or heirs, the same way an individual's net operating loss carryovers don't survive them either. The credit can still be used on the decedent's own final tax return for the year of death if there's tax liability to offset, but any remaining unused carryover simply expires at that point — there's no mechanism for an heir to inherit and use it on their own future returns. See the full foreign tax credit carryover rules for how the carryover works while the original taxpayer is alive to use it.