Form 3520: the form for money that is not even taxable.
An inheritance from a British parent is not US-taxable income. Report it late and the penalty can still reach a quarter of the amount. Form 3520 catches gifts, inheritances and trusts — and it catches ordinary families more than anyone else.
Figures on this page are stated for tax year 2025/26 UK · 2025 US. Thresholds change annually.
Gifts and inheritances from abroad
A US person receiving more than $100,000 in a year from a non-US individual or estate must report it, even though no tax is due. A much lower threshold — around $20,000, indexed — applies to gifts from foreign corporations or partnerships.
The amounts aggregate across related donors, so help with a house deposit from two parents counts as one gift. Reporting is the whole obligation: there is nothing to pay, only something to file.
- Over $100,000 from foreign individuals or estates
- Penalty up to 25% of the unreported amount
- Due with your return, including extensions
Trusts, and the second form
Where a US person is a grantor or beneficiary of a foreign trust, Form 3520 reports contributions and distributions, and Form 3520-A reports the trust itself — due earlier, on 15 March, and often needing the trustee's cooperation.
An ordinary UK family trust becomes a foreign trust the moment it touches a US person. Distributions carry throwback rules that tax accumulated income at punitive rates, so the structure is worth mapping before money moves rather than after.
Questions we get about this
If the total from them in the year exceeds $100,000, yes - on Form 3520 with your return.
No tax is due on it. The filing is the entire obligation, and the penalty for skipping it is the only real cost involved.
Generally not. An inheritance from a non-US person is not US-taxable income to the recipient.
It is reportable above the threshold, and any income the inherited assets subsequently produce is taxable in the normal way.
Broadly, a trust that fails the US court and control tests - which covers most UK family trusts, and some arrangements that are not called trusts at all.
Certain foreign pensions and savings structures can also fall in, which is why the analysis is worth doing properly.
Late filings can be submitted with a reasonable cause statement, and where other years are also outstanding the Streamlined procedures usually cover the whole position.
Because the penalty is a percentage of the amount rather than a flat sum, this is one to resolve early.
Related pages
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The US 183-day rule explained: the substantial presence test formula, exempt individuals, the closer connection exception and the treaty tie-breaker.
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What US and UK tax specialists handle that a general accountant does not: residence tests, treaty relief, FBAR, PFICs, pensions, property and catch-up filings.
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Cross-border trusts, gifts and inheritance: US-UK estate planning, foreign trust reporting and the forms that catch families out.
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Cross-border families: gifts, inheritances, trusts and the reporting that catches ordinary family planning, including children with US citizenship.
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The Foreign Bank Account Report — FinCEN Form 114 — and its $10,000 aggregate trigger.
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FBAR & FATCA thresholds
FBAR and FATCA thresholds explained: which accounts count, how the $10,000 aggregate works, Form 8938 limits and fixing missed filings.
Further reading
- Form 3520: the report that follows a gift from home
A gift from a British parent is rarely taxable to you. Failing to report it is a different matter, and the penalty runs as a percentage of the gift.
- Inheritance tax when one of you is American
Britain taxes the estate, America taxes by citizenship, and the spouse exemption most couples rely on works differently when the survivor is not American.
Last reviewed · Figures stated for tax year 2025/26 UK · 2025 US. Thresholds and rates change annually — check figures against the current tax year before relying on them.
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