FBAR Penalties Don't Die With You: What Every Heir and Executor Needs to Know

When a relative dies with an unreported foreign bank account, the obligation does not die with them. Federal courts have repeatedly held that penalties for a missed FBAR filing survive the account holder’s death and become a claim against the estate and the IRS pursues these claims aggressively, sometimes years after the person passed away.

The Filing Requirement

Any U.S. person citizen, green card holder, resident alien, or entity, including an estate, with a financial interest in or signature authority over foreign accounts exceeding US $10,000 in aggregate at any point in the year must file an FBAR with FinCEN. It is a separate filing from the income tax return, and many otherwise-compliant taxpayers never realize it applies to them.

The Penalties

A non-willful failure (generally an oversight) carries a penalty of US $10,000 per year. A willful failure, knowing or reckless disregard, can reach the greater of US $100,000 or 50% of the account balance per year. In Bittner v. United States (2023), the Supreme Court held the non-willful penalty applies once per report, not per account — reducing exposure, though the willful penalty was untouched.

Why It Survives Death

Courts treat FBAR penalties as remedial, compensating the government for harm, rather than purely punitive, so they survive the taxpayer’s death. United States v. Gill upheld even a non-willful penalty against an estate. United States v. Wolin allowed the government to collect roughly $1.4 million from an estate. United States v. Hendler (2024) confirmed the liability accrues on the missed filing date, so the IRS can assess it after death even if nothing was proposed before. And United States v. Green held a willful penalty against a mother’s estate survived, with her children pursued as representatives.

The IRS Pursues Heirs, Too

The government has substituted estates into pending cases, amended complaints to name heirs, and pursued distributees directly under transferee liability when assets were paid out before a known federal debt was resolved. Executors who distribute assets without addressing a suspected foreign account can face personal exposure. In United States v. Gaynor, the IRS assessed an $18.4 million willful penalty against an estate; a jury ultimately found the conduct non-willful, but the case shows how large the exposure — and the litigation — can get.

How to Protect the Estate

•        Talk to family members about foreign accounts while they are living, and review past filings with a qualified adviser.

•        Correct missed filings early as compliance pathways are far cheaper than a contested penalty.

•        Executors: confirm FBAR history, request foreign account records, and hold final distributions until reporting exposure is evaluated.

If the Problem Has Already Surfaced

Do not file just blindly file with the service Center or FinCEN. The Streamlined Filing Compliance Procedures, delinquent FBAR submission procedures, and the IRS Voluntary Disclosure Program each fit different situations, and choosing wrong can increase exposure. The Voluntary Disclosure Program generally treats conduct as willful, and non-willful claims within it succeed only with clear and convincing evidence. If a penalty is already assessed, an executor or heir may request abatement for reasonable cause, though the estate bears the burden of proof. Get professional guidance before submitting anything.

The bottom line: an unreported foreign account does not disappear with the account holder. If you are managing an estate with a known or suspected foreign account, speak with a qualified international tax attorney before distributing assets.

Need To Successfully Address Non Filed Form 5471,
5472, 8938, & 3520 Late Filing Penalties?

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Sources:

Bittner v. United States, 598 U.S. 358 (2023): https://www.supremecourt.gov/opinions/22pdf/21-1195_h3ci.pdf

United States v. Gill (S.D. Tex.): https://freemanlaw.com/do-fbar-penalties-survive-death-a-texas-court-says-yes/

United States v. Wolin, Estate of Ziegel, 489 F. Supp. 3d 21 (E.D.N.Y. 2020): https://casetext.com/case/united-states-v-wolin-estate-of-ziegel

United States v. Hendler (S.D.N.Y. 2024): https://www.taxnotes.com/research/federal/court-documents/court-opinions-and-orders/death-did-not-extinguish-fbar-penalty-liability-court-says/7lm7m

United States v. Green, 457 F. Supp. 3d 1262 (S.D. Fla. 2020): https://freemanlaw.com/fbar-a-catalogue-of-fbar-cases/united-states-v-green-fbar-series/

United States v. Gaynor (M.D. Fla., estate of Lavern Gaynor): https://www.wealthmanagement.com/estate-planning/neither-death-nor-quiet-disclosure-erases-an-fbar-filing-obligation

FinCEN, Report Foreign Bank and Financial Accounts: https://www.fincen.gov/report-foreign-bank-and-financial-accounts