# Child FBAR and UK "Child Trust Fund"



## EF_chantelle

hi, my son has something called a "Child Trust Fund" that the UK bequeathed to virtually all children born between 2002 and 2011. Because family members have topped it up each month, it has tipped into $10k territory. It is a tax free account invested in shares. I have never declared its income and have no idea how I would work it out.

The UK/US FATCA treaty says these accounts aren't reportable for FATCA. However I assume it is still reportable under FBAR?

thanks for any help!


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## BBCWatcher

The FATCA intergovernmental agreement is an agreement between governments. Your child is not a party to that agreement and still has whatever FATCA obligations are applicable. None in this case, but not because of somebody else's agreement.

Yes, FBAR (and FATCA) reportable, depending on the thresholds reached. Also potentially U.S. taxable.


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## Bevdeforges

OK, first we have to assume that the child is a US citizen. If only one parent is a US citizen (and has signature authority over the Child Trust account) then I'd just include it with the US parent's FBAR. 

On the FATCA side of things, I'd be tempted to do the same - though don't forget that the filing threshold for FATCA is much higher for those resident outside the US ($200,000 for filing single or separately, and $400,000 for filing jointly). Plus, if you don't have to file an income tax return (usually due to insufficient income) then you don't have to file the FATCA stuff.
Cheers,
Bev


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## EF_chantelle

thanks for the answers. I will go ahead and start his entry into the US tax and reporting system. This type of account doesn't have any parent signature authority. It can't be touched until the child is 18.


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## Nononymous

As a parent of a dual-citizen child, I would suggest a quick pause to consider. Once you start down the compliance road, he or she is stuck on the compliance road. You are making that decision for them. If your child wasn't born in the US and has a UK passport, he or she has a pretty good chance of staying off the radar, should they so choose. The decision to become compliant can always be made later - if for instance if the child wishes to actually use the US citizenship, for study or work.


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## Bevdeforges

Don't forget, too, that your child has no reason to file an income tax return at all if his/her gross income is less than $10,000. 
Cheers,
Bev


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## BBCWatcher

Nononymous said:


> Once you start down the compliance road, he or she is stuck on the compliance road.


No, that's not correct. I disagree. A U.S. citizen-child can very easily renounce U.S. citizenship once reaching the age of majority, at age 18. It's _extremely_ unlikely there would be any exit tax implications. (Most children are not Justin Bieber. And even if they were, U.S. tax and financial reporting compliance would still be advantageous because that's how you get the Bieber-like money.)

The alternative -- breaking U.S. laws on behalf of the child -- tend to be much worse _for the child_ never mind the adults. But the child maintains freedom of action upon reaching age 18.

There is no "damn good reason" here for breaking the law.


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## BBCWatcher

Bevdeforges said:


> Don't forget, too, that your child has no reason to file an income tax return at all if his/her gross income is less than $10,000.


I think the original poster was referring to the child's FBAR (FinCEN Form 114).


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## Nononymous

BBCWatcher said:


> The alternative -- breaking U.S. laws on behalf of the child -- tend to be much worse _for the child_ never mind the adults. But the child maintains freedom of action upon reaching age 18.
> 
> There is no "damn good reason" here for breaking the law.


It's easier for the child to continue breaking the law if the parents haven't been obeying it. That's the approach we're taking.

The counsel I will give my daughter - dual but with non-US birthplace - at 18 is that she has three options: renounce her US citizenship if she feels strongly about not wishing to keep it (hell, I'll even give her the $450 fee); become tax compliant (easy) if she wishes to work or study in the US; continue flying under the radar if she's undecided. 

She'll have a pretty substantial RESP by that point, but it won't be reported under FATCA and I see no reason to volunteer that information via FBAR.


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## BBCWatcher

Your relationship with your daughter is yours alone. As general advice, I think you're way off base. We'll agree to disagree on this one, apparently.


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## Nononymous

She's thirteen and unbelievably pissed off that she's a US citizen. I'm actually the reasonable one. 

I tell her to cheer Americans during the Olympics and she loses her mind.


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## Nononymous

But the general point, agreeing to disagree, is that I think her anonymity from the US is worth protecting - "activating" that citizenship and subjecting herself to tax reporting requirements should be her decision to make, as an adult.


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## BBCWatcher

We're not going to convince each other to change our views, so I'd give up on that. I'll only further explain mine.

I disagree in part because "activating" U.S. citizenship is not at all a trivial exercise for a young adult. Renunciation, comparatively, is.

There is, in my view, no _damn good reason_ (DGR) to violate the law (or set of laws) on behalf of a minor in most such circumstances. "Anonymity" is not a DGR in my view. Especially with teens who seem to have no problem posting everything about themselves, their families, and their friends on Facebook. Unless and until there's at least one DGR, I don't recommend violating any country's laws, period. In the general case there simply is no DGR here.

My view is not unique to U.S. citizenship, by the way. Documenting a child's citizenship and defaulting to an assumption of lawful participation in that citizenship while the child is a minor ought to be, absent a DGR, the norm. Once that child reaches his/her age of majority, all decisions are conveniently possible.

By the way, along these lines (and observing what other countries are doing), just this month Italy raised the price of a delayed birth registration from 0 to 300 euro. (The new fee will go into effect sometime in 2014, but the legislation passed this month.) That is, if you don't document your child's Italian citizenship, once that child hits age 18 it costs him/her 300 euro plus several bureaucratic months to get his/her citizenship documented. While he/she is sitting in who knows where, unable to enjoy any of the rights and privileges associated with that citizenship.

Italy then has obligatory residential and civil status reporting. Move from the 4th floor to the 6th floor in an apartment building in Qatar, for example, and that's supposed to be reported via the Italian consulate. But there's no DGR to avoid that particular obligation. Once the child is an adult, he/she can decide whether that lifetime of reporting is worth it.


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## Nononymous

I've taught her to jaywalk and download torrents, so I guess it's not a big surprise that I'm letting her choose whether to become tax compliant.


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## Nononymous

BBCWatcher said:


> "Anonymity" is not a DGR in my view. Especially with teens who seem to have no problem posting everything about themselves, their families, and their friends on Facebook.


This is getting off topic, and yes I understand it's meant metaphorically, but teens go nowhere near Facebook now - it's full of parents and teachers and other old people.


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## Bevdeforges

OK, as has already been said, this is veering wildly off topic. I don't believe that anyone is advocating breaking the law here. It can be argued that, given that neither parent is a signer on this Child Trust account and that the account "holder" his or her-self is (a) a minor and (b) not able to touch the account balance until s/he reaches majority that the account itself may well be considered to be "unreportable" for FBAR purposes. (Or certainly not subject to penalty should the Treasury Dept somehow stumble onto the fact of its existence before the child in question gains access to the funds.)
Cheers,
Bev


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## BBCWatcher

Bev, there are no special FBAR rules for U.S. minors. All U.S. persons, including U.S. minors, are subject to the same FBAR requirements. And obviously the parents (or guardians) of minors are the ones with the filing responsibilities on behalf of minors (under 18s).

Restrictions on funds have never, in and of themselves, constituted a valid reason why financial accounts are not subject to reporting.

Minors cannot be held criminally liable for reporting violations while they're (unemancipated) minors. Their parent(s)/guardian(s) can. It's the same way IRS filings work.

I appreciate the attempt, but no, those arguments don't fly, legally speaking.


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## Nononymous

BBCWatcher said:


> Minors cannot be held criminally liable for reporting violations while they're (unemancipated) minors. Their parent(s)/guardian(s) can. It's the same way IRS filings work.


I assumed that but am glad to have it confirmed. I assume all the "criminality" for not reporting my child's accounts (add it to the ever-growing pile of my own badness, oh well) so she herself is not at any risk should she decide to become compliant at 18. An even better deal for her.


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## BBCWatcher

Nononymous said:


> An even better deal for her.


Not really. Most children don't benefit if their parent(s) are fined (more heavily) and/or serving (more) time in prison.


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## Nononymous

Indeed not. But no concern in this case. Unless the law changes, I can't be fined in Canada, and my name is nowhere near her RESP. So she's in pretty good shape.


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