Gifts, Inheritances and Form 3520 for Americans Living in Andorra

Americans living in Andorra sometimes receive money or assets from family abroad — a cash gift, an inheritance from a relative's estate, or a family trust distribution. A frequent assumption is that money from family is simply “not a tax issue.” That assumption can be wrong in a specific way: even when a transfer is not taxable income in the United States, U.S. information-reporting obligations can still apply.

This article explains how U.S. reporting rules can apply to foreign gifts, inheritances and trust transactions — including Form 3520, Form 3520-A, and their overlap with FBAR, Form 8938, PFIC and foreign company reporting. It is general educational information, not individualized tax, legal, estate-planning or trust advice. For the baseline U.S. filing obligations, see our article on whether U.S. citizens living in Andorra have to file U.S. taxes.

Do Americans Living in Andorra Need to Report Foreign Gifts or Inheritances?

Americans living in Andorra who receive certain large gifts or inheritances from foreign persons, or who are involved with foreign trusts, may have U.S. information-reporting obligations even when the transfer itself is not treated as taxable income. Form 3520 or related filings may be required depending on the source, amount, and structure of the transaction.

Reporting depends on the source, amount and structure of the transaction — the same amount can be reportable from one type of donor and not another. Reporting and taxation are also separate: a transfer can be reportable without being taxable income, and a transfer that is not reportable may still produce taxable income later.

What Is IRS Form 3520?

Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, is an information return filed by U.S. persons — and, in certain circumstances, executors of U.S. decedents' estates — with the IRS. Under the current Form 3520 instructions, it is used to report certain transactions with foreign trusts and the receipt of certain foreign gifts and bequests; see also the IRS About Form 3520 page. Two points matter: the filing obligation is separate from whether income tax is due on the same transaction, and the form covers more than one type of event — foreign gifts, foreign trust distributions and certain foreign trust transfers or ownership matters — under rules that are not the same.

When Can a Foreign Gift Need to Be Reported?

Under the IRS gifts from foreign persons guidance, the reporting thresholds differ by the type of donor, and the thresholds should not be mixed:

• Gifts or bequests from a nonresident alien individual or a foreign estate. Reporting is required when the aggregate amount received from that person — including related foreign persons, or a nominee or intermediary — exceeds $100,000 during the taxable year. Where the aggregate exceeds that amount, each individual gift or bequest in excess of $5,000 must be separately identified.
• Purported gifts from foreign corporations or foreign partnerships. A different, lower threshold applies: the aggregate amount received from foreign corporations, partnerships and related foreign persons exceeded $20,116 for 2025 and $20,573 for 2026, adjusted annually for inflation. The IRS may also recharacterize such purported gifts.
• Foreign trusts. Transactions with foreign trusts are not covered by the gift thresholds above; they follow their own reporting rules, discussed below.

Aggregation matters as well: gifts from foreign persons who are related to each other — or where one acts as a nominee or intermediary for another — may be aggregated for threshold purposes. For U.S. citizens or residents living outside the United States, the Form 3520 instructions provide an extended due date — generally the 15th day of the sixth month following the end of the tax year — which should be confirmed for the year involved.

Do Foreign Inheritances Need to Be Reported?

An inheritance from a foreign estate is not automatically U.S. taxable income — but reporting can still be required, and the source and structure of what is received matter. Bequests from a foreign estate fall within the Form 3520 gift-reporting rules above when the aggregate exceeds the applicable threshold, and assets received in kind — accounts, securities, company shares or real estate — raise their own reporting questions.

Inherited assets may also produce taxable income or gains later: dividends, interest, rental income, or gains on a later sale. Basis and valuation questions can affect later U.S. tax results. This article does not address estate or inheritance tax in Andorra or elsewhere, and it is not estate-planning advice.

What If My Parents or Relatives Send Me Money From Abroad?

A family relationship does not automatically eliminate reporting. What matters is what the transfer actually is: a genuine gift, a loan, a trust distribution, a repayment, or something else — and amounts from related persons may be aggregated, so a series of transfers can matter even when each is modest. Bank transfer records, the identity of the sender and any written terms are relevant both to determining what the transfer is and to evidencing that determination later..

Does It Matter Whether a Transfer Is a Gift or a Loan?

Yes — the classification can change the U.S. tax and reporting analysis. A genuine loan may be treated differently from a gift for income tax purposes, and transfers involving foreign lenders can raise their own reporting and interest-inclusion questions. Documentation can support the classification: written terms, repayment expectations and actual repayment behavior. A transfer labeled as a loan but functioning economically as a gift may not be treated according to its label — the classification should reflect the actual arrangement, and the facts should be documented consistently with it.

What If a Foreign Trust Is Involved?

Foreign trusts can trigger separate U.S. reporting that is independent of the gift thresholds. Depending on the situation, Form 3520 may apply to certain transactions with a foreign trust — including distributions received and certain transfers or ownership matters — and Form 3520-A may be required for certain foreign trusts with U.S. owners. The IRS foreign trust reporting guidance provides an overview of this area.

The rules are technical: who is treated as the trust's owner, what constitutes a distribution, and how grantor and non-grantor trusts are distinguished all affect the analysis, and not every trust situation is the same.

What Is Form 3520-A?

Form 3520-A is the annual information return of a foreign trust with at least one U.S. owner — a filing responsibility that can sit with the trust or its fiduciary, and that differs from the Form 3520 obligations of a U.S. beneficiary or transferee. See the IRS About Form 3520-A page and the instructions for Form 3520-A.

In some situations, the instructions describe substitute filing arrangements, where a U.S. owner files substitute information with their own return under conditions in current guidance. The specifics depend on the trust's facts and the year involved.

How Are Distributions From a Foreign Trust Treated?

The reporting and tax treatment of a foreign trust distribution can depend on its nature — whether treated as income or corpus, how the trust's income and history are characterized, and what the trustee's beneficiary statement says; in some cases the U.S. treatment follows that statement. No general calculation or outcome can be offered here — the analysis depends on the trust's facts and the applicable rules, and professional review may be appropriate where a statement is unclear.

Can Foreign Trust or Inherited Assets Also Affect Form 8938?

Some foreign financial interests and assets — which can include certain accounts or entity interests received by inheritance — may also be relevant to Form 8938 (Statement of Specified Foreign Financial Assets) when the applicable thresholds are met. See the IRS Form 8938 instructions for what counts as a specified foreign financial asset.

Form 3520 and Form 8938 are not the same filing: Form 3520 reports certain foreign trust transactions and foreign gifts, while Form 8938 reports specified foreign financial assets against income-related thresholds — the same inherited account or trust interest may be relevant to both. See our Form 8938 and FATCA guide for Americans living in Andorra.

Can Gifts or Inheritances Affect FBAR Reporting?

The receipt of a gift or inheritance is not itself an FBAR event. FBAR — FinCEN Form 114 — reports foreign financial accounts, and the question that matters is whether the transfer creates or adds to a reportable account.

Where an inherited asset is a foreign bank, investment or similar financial account — or where received funds are placed in a foreign account the U.S. person owns or has signature authority over — that account may enter the FBAR analysis, and aggregate account values are measured across all reportable accounts. See our FBAR guide for Americans living in Andorra and the FinCEN FBAR filing page.

What If I Inherit Foreign Funds or Investment Accounts?

Inherited foreign investments — foreign mutual funds, ETFs or pooled products — may raise PFIC questions; being inherited does not by itself eliminate the PFIC analysis, and what arrives in the account matters: funds held in a wrapper, an insurance-bond structure or a pooled vehicle can each raise different questions. See our PFIC guide for Americans living in Andorra and the IRS About Form 8621 page.

What If I Inherit Shares in a Foreign Company?

Inheriting shares in a foreign company can change ownership or control percentages, and depending on the level of ownership and the applicable filing categories, Form 5471 or other foreign company reporting may be relevant — in some cases in the year the inheritance is received. An inheritance can move someone over a filing threshold or add a second family member's ownership in the same company, so a review of ownership percentages afterward can identify whether any filings follow. See our Form 5471 guide for Americans living in Andorra and the IRS About Form 5471 page.

What If I Received a Foreign Gift or Inheritance in a Prior Year and Did Not Report It?

Prior-year facts need review before deciding anything. If a reportable gift, inheritance or trust distribution was not reported on Form 3520, late filing may be required, and penalty treatment depends on the facts and on IRS discretion in the circumstances.

The Streamlined Filing Compliance Procedures may or may not be relevant: they address certain non-willful prior-year issues, and whether they are available or appropriate depends on the whole situation. No penalty outcome can be promised in advance. See our prior-year compliance guide and our Streamlined filing guide for Americans living in Andorra.

What Records Should I Keep for a Foreign Gift or Inheritance?

• Donor or decedent identity. Who the transfer came from, and their country of residence.
• Relationship. How you are related to the donor or decedent — relevant to aggregation rules.
• Date of transfer. When each amount or asset was received.
• Amount or value. The cash amount or the value of assets received in kind.
• Source country and institutions. The country and the bank or institution the transfer came from.
• Bank transfer records. Transfer confirmations showing the flow of funds.
• Estate documents. The will and probate or estate-settlement documents.
• Trust documents. The trust instrument and any trustee distribution statements.
• Valuation records. Date-of-death or transfer-date valuations for inherited assets.
• Gift or loan classification. Any written terms or records evidencing the nature of the transfer.
• Beneficiary statements. Trustee statements received with trust distributions.

Should Large Foreign Gifts or Inheritances Be Reviewed Before Transfer?

An advance review can identify whether reporting follows from a planned transfer, and how its source, structure and timing affect the U.S. position. Where trusts or entities sit between the family member and the recipient, the structure itself can change the analysis — a transfer through a foreign trust is not analyzed like a direct gift.

The purpose of a review is to understand the reporting position — not to restructure a genuine family transfer into a different form, which is not something this article or this firm advises. For the broader picture, see our U.S. tax planning guide for Americans living in Andorra and our article on foreign pensions and retirement accounts where inherited assets include retirement arrangements.

Foreign Gift and Inheritance Checklist for Americans Living in Andorra

• Identify the source of the transfer — person, estate or trust.
• Identify the donor, decedent or trust, and your relationship to them.
• Determine whether the transfer is a gift, inheritance, loan or trust distribution.
• Verify the amount or value received, including aggregation with related persons.
• Gather documentation — transfer records, estate or trust documents, valuations.
• Review the Form 3520 thresholds and rules for the tax year involved.
• Review Form 3520-A where foreign trust ownership is involved.
• Review Form 8938 for inherited foreign financial assets.
• Review FBAR for foreign accounts created or funded by the transfer.
• Review PFIC issues for inherited foreign investment funds.
• Review Form 5471 for inherited interests in foreign companies.
• Review prior-year compliance where earlier transfers were not reported.
• Keep valuation records and classification evidence.
• Seek professional review for large or complex transfers.

U.S. Tax Professional in Andorra
Aleksandr Isakov, CPA, Principal of US CAN Tax Group, is based in Andorra and has 25+ years of experience in U.S. tax and cross-border tax matters.

For how the firm works with clients there, see U.S. tax services for Americans living in Andorra.

The information in this article is general educational information and does not constitute individualized tax, legal, immigration, estate-planning, investment, trust, corporate, or financial advice. U.S. filing and reporting requirements depend on each person's circumstances and applicable law.