FBAR Foreign Life Insurance Policy
FBAR Foreign Life Insurance Policy Reporting: The FBAR Foreign Life Insurance Policy Reporting to the IRS rules are complex. Even though most owners of a foreign life insurance policy overseas do not consider their own insurance policy as a foreign account, the IRS does. (of course they do, right?)
Technically, the policy will have an identifier, which is then reported as an account number on the FBAR (FinCEN Form 114). The Internal Revenue Service has taken an aggressive approach to foreign accounts compliance and unreported offshore income. Therefore, if you are out of compliance, you may consider the IRS FBAR Life Insurance Policy Reporting
The FBAR Life Insurance Policy Reporting rules have many components to it — and the reporting revolves around surrender value. Not all life insurance policies are reported.
Rather, only certain life insurance policies are reportable once they have what is referred to as a surrender value. If the foreign insurance policy does not have a surrender or “cash” value, it may not be reportable.
Surrender Value for FBAR Life Insurance Policy Reporting
The Surrender Value is the current “cash” value of the life insurance policy. For example, let’s say Daniel purchased a life insurance policy.
He paid $50,00 and then premiums each year, with the payout (in 30-years) to be $2,000,000.
Is the surrender value $2.000.000?
That is the payout when the triggering event occurs. Instead, the surrender value is the value that the owner of the policy can “surrender” or turn in the policy to the insurance company, and receive a value in exchange for surrendering the policy and the rights associated with it.
CVAT (Cash-Value Accumulation Test)
Sometimes, the policy will provide a surrender value for you. Other times, the insurance company will not provide that information. If you are unsure what the surrender may be, you can refer to the IRS Cash Value Accumulation Test for guidance.
Beneficiaries & FBAR Insurance Policies
A common question involves whether beneficiaries of foreign life insurance policies must report the policy on their FBAR. The answer is generally, no. That is because the beneficiary does not have any ownership interest in the policy AND can be removed at any time by the owners.
A ULIP is a Unit-Linked Insurance Policy. This is a common investment tool in foreign countries. In this scenario, the policy has an investment component, which is linked to the policy and premiums.
Visit our main site to learn more about ULIPs.
We Specialize in Streamlined & Offshore Voluntary Disclosure
Our firm specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20-years experience, and the entire matter (tax and legal) is handled by our team, in-house.
*Please beware of copycat tax and law firms misleading the public about their credentials and experience.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Our lead attorney is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Offshore Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
Interested in Learning More about our Firm?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
We specialize in FBAR and FATCA. Contact our firm today for assistance with getting compliant.