Form 3520 and 3520-A: reporting foreign gifts, inheritances and trusts as a US retiree in Spain

One of the quietest tax traps for Americans who build a life in Spain has nothing to do with the visa and nothing to do with Spanish tax. It is a US information return called Form 3520, and its companion Form 3520-A. A retiree inherits from a Spanish spouse, receives a generous gift from a parent back home, or is named a beneficiary of a family trust abroad — none of it US-taxable — and assumes there is nothing to do on the American side. Years later they discover that a form they never heard of was due, and that the penalty for missing it is calculated on the size of the gift, not on any tax that was owed.

The point that trips people is the gap between taxing and reporting. You can owe no US tax on a foreign gift or inheritance and still be required to report it. Form 3520 is the report. It does not create a tax bill by itself; it tells the IRS that money or property crossed from a foreign source into the hands of a US person. Understanding when it applies — and, just as important, when it does not — is what keeps an ordinary Spanish inheritance from becoming an expensive American problem.

This note sits alongside our pages on US tax filing obligations for American retirees in Spain, the streamlined catch-up for people behind on US filings, and — on the Spanish side of the same events — the Spanish inheritance process for American heirs, Spanish gift tax on lifetime gifts and Modelo 720 foreign-asset reporting. Form 3520 is the US mirror image of those Spanish duties, and the two systems do not talk to each other.

"American clients relax the moment they learn a Spanish inheritance is not US income. I have to gently move them on to the next sentence: it may still have to be reported. The tax was zero, but the form was mandatory, and the penalty is measured against the inheritance. We flag it early and send them to a US preparer while there is still time."

The short answer

If you are a US citizen or green-card holder living in Spain, Form 3520 is an information return you may have to file when you receive a large gift or inheritance from a non-US source, or when you deal with a foreign trust. It does not tax the money — most foreign gifts and inheritances are not US income to the recipient — but it must be filed anyway, and the deadline runs with your annual US tax return.

The version that catches retirees is the foreign-gift branch. If the total you receive during the year from non-resident individuals or foreign estates exceeds 100,000 US dollars, you report it. Inheriting a Spanish home, a bank balance or a securities portfolio from a spouse or parent lands squarely in that branch. A separate, more involved set of rules covers foreign trusts — creating one, transferring to one, owning one under US rules, or taking a distribution from one — and those are reported on Form 3520 and, for a US-owned foreign trust, Form 3520-A.

What Form 3520 and 3520-A actually are

Form 3520 has an unwieldy official title — the Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts — and that title is the whole map. It gathers two very different things under one roof:

• Certain foreign gifts and bequests. Large gifts or inheritances received by a US person from a foreign person or estate. This is the part most retirees encounter, and it is purely a receipt report.
• Transactions with foreign trusts. Creating a foreign trust, transferring money or property to one, being treated as its owner under the US grantor-trust rules, or receiving a distribution from one. This part is more technical and is where the heavier penalties live.

Form 3520-A is the trust's own annual information return — the Annual Information Return of Foreign Trust With a U.S. Owner. In principle the foreign trust files it, but in practice the responsibility falls on the US owner, who must make sure it is filed and, if the trustee will not, may file a substitute 3520-A to protect their position. In other words, if you are treated as the US owner of a foreign trust, you can be on the hook for two forms in the same year: your own 3520 and the trust's 3520-A.

Both are information returns, filed separately from — though on a timetable linked to — your Form 1040. Neither computes a tax on the gift or inheritance itself. Their job is disclosure: to let the IRS see foreign money and foreign structures touching a US taxpayer, which is exactly why the penalty regime is built to punish silence rather than to collect tax.

The trap: a foreign gift or Spanish inheritance

Here is the scenario that repeats. An American who has retired to the Costa del Sol inherits from a Spanish spouse, or receives a lifetime gift from a Spanish parent-in-law, or a US-citizen widow inherits the family home outright. The Spanish side is handled — the notarised inheritance, the Impuesto sobre Sucesiones y Donaciones, the change of title. On the US side the instinct is that a gift is not income and there is nothing to file. The instinct is half right: it is not income, and there is usually no US tax. But above a threshold, it is still reportable.

The thresholds work like this. Gifts and bequests from a non-resident alien individual or a foreign estate are reported once the aggregate for the year exceeds 100,000 US dollars — you count everything received from that person (and related foreign persons) together, and if the total crosses the line, the whole amount goes on the form. Gifts from a foreign corporation or foreign partnership are caught at a much lower, inflation-adjusted figure — in the high tens of thousands of dollars, changed each year — so check the current-year amount rather than assuming the six-figure line applies. A Spanish spouse, parent or sibling is a non-resident alien individual, which puts most family inheritances in the 100,000-dollar bucket.

Two clarifications save a lot of worry. First, this branch is a receipt report only — you are not paying US tax by filing it, and a foreign inheritance does not become taxable because you disclosed it. Second, it is about the source, not the location of the money: an inheritance from a non-US relative is reportable even if the funds are wired into a US bank. The mirror image is also true — a gift from a fellow US person is a domestic matter outside Form 3520 entirely, however large. What makes the form apply is a foreign donor or a foreign estate, not a foreign bank.

Foreign trusts, usufructs and foreign pensions

The trust side of Form 3520 is where retirees need to tread carefully, because Spanish life throws up arrangements that look like trusts to an American eye but may not be, and structures that do not look like trusts but can be treated as one. A first, reassuring distinction: an ordinary US revocable living trust is a domestic trust, not a foreign one, so moving to Spain does not turn it into a 3520 problem by itself — though where it is administered and controlled after you move is a question worth checking.

Spanish succession devices such as the usufruct and bare-ownership split — where a surviving spouse keeps a life interest while children hold the underlying title — are civil-law property arrangements, not Anglo-American trusts, and generally are not foreign trusts for US purposes. But the receipt of the underlying inheritance can still hit the foreign-gift branch above, so the fact that no trust exists does not mean no form. The characterisation is fact-specific and is exactly the kind of question to put to a US preparer rather than resolve by analogy.

The area that surprises people most is foreign pensions and savings plans. Some non-US retirement or savings arrangements can be treated as foreign trusts under US rules, which would in theory pull them into 3520 and 3520-A. Recognising how harsh that outcome is, the IRS has carved out relief for certain tax-favoured foreign retirement and non-retirement savings trusts that meet defined conditions, exempting them from these forms. Whether a particular Spanish or third-country plan qualifies is a technical judgement — the safe move is to identify every foreign plan and let a US adviser decide, rather than assume either that it is exempt or that it is caught. Our page on foreign non-US pensions covers the Spanish-visa angle of the same accounts.

Reporting is not taxing — but the penalties bite

Because Form 3520 collects no tax on the gift, it is tempting to treat it as optional paperwork. That is the expensive mistake, because the penalties are deliberately built to make silence costly. For an unreported foreign gift or bequest, the penalty can climb to 25 per cent of the amount that should have been reported — a figure with no relationship to any tax, since there was none. On a six-figure inheritance, that is a five-figure penalty for a form that would have taken an afternoon.

The foreign-trust penalties are heavier still. Failing to report the creation of, or a transfer to, or a distribution from a foreign trust generally exposes you to the greater of 10,000 dollars or 35 per cent of the relevant amount, while failing to report ownership of a foreign trust on Form 3520-A carries a 5 per cent charge on the trust's assets attributable to you — with additional continuing penalties if the failure drags on after the IRS notifies you. These are among the harshest information-return penalties in the US code precisely because the forms are the government's only window onto foreign structures.

There is a safety valve: these penalties can be abated for reasonable cause — a genuine, well-documented reason for the failure that is not simply not knowing the rule. But reasonable cause has to be established, not assumed, and the burden is on you. The practical lesson is that the cheapest version of this problem is the one you never have: identify the reporting duty when the gift or inheritance happens, and file on time.

How this sits next to Modelo 720 and Spanish inheritance tax

A single event — inheriting from a Spanish spouse, say — can set off obligations in two countries that have nothing to do with each other. It is worth keeping the boxes separate so none gets missed:

• US Form 3520 — a federal information return to the IRS, because a US person received a foreign gift or bequest, or dealt with a foreign trust. No tax on the receipt; penalty for non-filing.
• Spanish inheritance tax — the Impuesto sobre Sucesiones y Donaciones, a real tax on the inheritance itself, handled under Spanish and regional rules where you are resident.
• Spanish Modelo 720 — a declaration to the Spanish tax authority of assets you hold outside Spain once they pass reporting thresholds; if the inheritance includes US or other foreign assets, this can be engaged too.
• US estate and gift tax — falls on the donor or the estate, not you, and interacts with Spanish inheritance tax on the estate side rather than through Form 3520.

The key mental model is direction. Modelo 720 points from Spain outward at your foreign assets; Form 3520 points from the US inward at foreign money reaching you. They can both be triggered by the same inheritance, but filing one does nothing to satisfy the other, and the deadlines and penalty rules are entirely different. A retiree who handles the Spanish notary and tax flawlessly can still have an open US reporting gap — which is exactly why the two systems need to be mapped together, once, when the event occurs.

Deadlines, who files, and fixing a missed year

For the gift and most receipt situations, Form 3520 is due with your income tax return, including extensions — so the ordinary April deadline, pushed to mid-June by the automatic extension US citizens abroad receive, and to mid-October if you extend. It is filed separately from the 1040 and sent to its own IRS service centre, which is one reason it gets forgotten even by people who file their main return on time. Form 3520-A, the trust's return, runs on the trust's tax year and is generally due by the 15th day of the third month after the trust's year-end, with its own extension mechanism — a genuinely different clock from your personal one.

If a year was missed, it is usually fixable, and the route matters. Where the only defect is a late information return and there is no unreported income behind it — the classic case of a tax-free foreign inheritance that simply was not reported — the delinquent international information return procedures allow you to file the late form with a reasonable-cause statement attached, rather than entering a broader disclosure programme. If there is also unreported foreign income or accounts, the streamlined foreign offshore procedures may be the better fit. Choosing the wrong path can turn a clean fix into a messier one, so the sequence is: identify what was missed, confirm whether income was involved, and pick the procedure with a US adviser before filing anything.

At a glance

Sources reviewed July 2026: US framework for Form 3520 (Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts) and Form 3520-A (Annual Information Return of Foreign Trust With a U.S. Owner), including the IRC §6048 foreign-trust reporting rules, the §6039F reporting of large gifts from foreign persons (the US$100,000 aggregate threshold for gifts/bequests from non-resident alien individuals and foreign estates, and the separate inflation-adjusted threshold for gifts from foreign corporations and partnerships), the §6677 penalty regime for the trust items (greater of US$10,000 or 35%, and 5% for a US owner's Form 3520-A ownership failure, plus continuation penalties) and the §6039F penalty for unreported foreign gifts (up to 25%); reasonable-cause abatement; the general non-taxation of gifts and bequests to the US recipient and the imposition of US transfer taxes on the donor/estate; the IRS delinquent international information return procedures and the streamlined foreign offshore procedures; and IRS relief for certain tax-favoured foreign retirement and non-retirement savings trusts (Rev. Proc. 2020-17). On the Spanish side: worldwide-income taxation of residents, the Impuesto sobre Sucesiones y Donaciones for inheritances and gifts, and Modelo 720 foreign-asset reporting. Dollar thresholds and inflation adjustments change; filing addresses and procedures change; individual facts (residency, donor status, trust characterisation) control the outcome. This is general information only, not legal, tax or immigration advice, and no lawyer-client relationship is created. Confirm your own US reporting position with a qualified US tax adviser and your Spanish position with Spanish counsel before acting.