Named in a Power of Attorney for a Foreign Account? FBAR Rules Required

Asset Protection

Individuals may or may not know if they are listed as an agent of a power of attorney, but they are still subject to Foreign Bank and Financial Accounts (FBAR) requirements.

The IRS recently updated the FBAR Reference Guide. The definition of signature authority has been expanded to encompass individuals appointed under power of attorney—regardless if they ever or are currently acting as an agent. The definition of signature authority is stated as: “The authority of an individual (alone or in conjunction with another individual) to control the disposition of assets held in a foreign financial account by direct communication (whether in writing or otherwise) to the bank or other financial institution that maintains the financial account.”
Under FBAR rules, United States citizens with interest in foreign accounts must e-file FinCEN Form 114 annually if the aggregate maximum values of all foreign accounts is over $10,000 at any time during the tax year. Monetary and criminal penalties may be imposed if the form is not filed.
If the power of attorney grants the agent signature authority over a foreign account with a value over $10,000 at any time during the tax year, the agent is subject to the FBAR filing requirements. (The principal is also required to file.) Both the agent and the principal will be personally liable for failure to file the FinCEN Form 114.
Individuals named in a power of attorney should:
Request notification of new accounts opened by the principal
Review with a lawyer the agent’s powers and limitations in jurisdictions where the foreign accounts are located
Question what type of power of attorney they have been named an agent in. Springing powers of attorney may limitliability prior to the power of attorney becoming effective. Determining liability may stem from documenting the date at which the agent assumed authority through the power of attorney.
Have a foreign account? Learn more about regulation changes to offshore accounts.
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