FBAR and Form 8938 for an Inherited Israeli Account: The Reporting Clock That Starts When the Money Becomes Yours

This is orientation, not legal or tax advice. It maps what exists and the questions to take to a licensed professional. It does not tell you what to do about your own estate or taxes.

An American heir usually meets the US reporting system once, at the moment of the inheritance: a Form 3520 for a bequest over $100,000 from a foreign estate, filed with that year's tax return, and then the file closes. What catches people a year or two later is that the file only closed on the inheritance. The Israeli bank account, the keren hishtalmut, the brokerage account in Tel Aviv, whatever the inheritance actually consisted of, is now a foreign financial account owned by a US person, and that ownership starts an annual disclosure cycle that has nothing to do with the one-time report and does not care that the money arrived by bereavement rather than by choice. This page orients you on the two annual reports, FBAR and Form 8938, what each covers, when each is triggered, and why the penalties attached to forms that collect no tax are the part to take seriously. It is general information, not legal or tax advice; where your accounts actually land is a question for a cross-border professional.

The inheritance was reported once. The account reports every year.

It helps to separate three reports that American heirs tend to blur together, because they answer three different questions.

Form 3520 answers "did a US person receive a large inheritance or gift from abroad this year?" It is filed once, for the year of receipt, when bequests from a foreign estate or nonresident individual exceed $100,000 in aggregate. If that step is behind you, or you are still in it, the walkthrough is in our page on the US heir's Form 3520.

FBAR answers "did a US person have foreign financial accounts this year?" It repeats every year the answer is yes and the combined value crossed the threshold.

Form 8938 answers a similar question for the IRS rather than the Treasury's financial-crimes side, at much higher thresholds, attached to your income tax return.

The inheritance triggered the first report. Owning what you inherited can trigger the second and third, every year, for as long as the accounts stay open.

FBAR: the $10,000 report almost every heir in this situation meets

The FBAR, formally FinCEN Form 114, is required when a US person's foreign financial accounts exceed $10,000 in combined value at any point in the calendar year. Every part of that sentence does work.

US person includes citizens and green-card holders wherever they live, including in Israel. Foreign financial accounts is broad: bank accounts, brokerage accounts, and most pooled savings vehicles, which for an Israeli inheritance typically sweeps in the checking account at Bank Leumi, the keren hishtalmut, and the kupat gemel alongside it. Combined means aggregate across all foreign accounts, not per account; an heir who already had an Israeli account for daily life and then inherited a second one adds them together. And at any point means the single highest day of the year counts, so an account that briefly held the proceeds of an apartment sale before the money moved on still crossed the line for that year.

Two features make the FBAR easy to miss. It is not a tax and collects no money; it is an information report. And it is not part of your tax return: it is filed separately and electronically through FinCEN's BSA E-Filing System, due April 15 with an automatic extension to October 15 that requires no request. A US tax preparer who never asked about foreign accounts will not have filed it for you.

One timing nuance heirs should know exists, without trying to resolve it here: reporting exposure can begin before the estate formally distributes, for example where an heir holds signature authority over the deceased's account or a substantial beneficial interest in an estate that holds foreign accounts. Whether your specific in-between period created a filing obligation is exactly the kind of question to put to a cross-border CPA with the dates in front of them.

Form 8938: the second report, at thresholds that inherited money actually reaches

Form 8938 is the IRS's own disclosure of "specified foreign financial assets," created under FATCA. It overlaps the FBAR heavily but is a separate obligation with separate penalties; filing one does not satisfy the other.

The thresholds are far higher than the FBAR's, and they depend on where you live and how you file. For a taxpayer living abroad, which the IRS tests by bona fide foreign residence for the full year or 330 days of foreign presence in a 12-month period, the trigger for an unmarried filer is more than $200,000 in specified foreign assets on the last day of the year, or more than $300,000 at any time during it. Married filing jointly doubles those to $400,000 and $600,000. For a US-resident heir the thresholds are much lower, starting at $50,000 at year-end for a single filer.

Those numbers sound comfortably distant until you price an Israeli inheritance. A modest Tel Aviv apartment sold by the estate, a pension account accumulated over a working life, a survivorship share of a joint account: inherited estates cross $200,000 routinely. Form 8938 attaches to the Form 1040 and follows its deadlines, extensions included.

If the inherited account is a keren hishtalmut or kupat gemel, a third layer can sit underneath both reports: the PFIC rules and Form 8621, which we covered in the inherited Israeli pension page. Disclosure and taxation are separate tracks, and that page is where the taxation track starts.

The penalties are the reason this page exists

Nothing above collects a shekel of tax. Israel does not tax the inheritance itself, and the US does not income-tax an inheritance either; what the US taxes is what the assets earn afterward. The reports are pure disclosure. The penalties are not proportionate to that.

For the FBAR, the civil penalty for a non-willful failure, the honest miss, currently runs up to $16,536 per unfiled report under FinCEN's inflation-adjusted table, and the Supreme Court's 2023 Bittner decision confirmed it applies per report, not per account. Willful violations run to the greater of $165,353 or half the account balance. For Form 8938, the penalty is $10,000, rising in steps to $50,000 if the failure continues after IRS notice. And the Form 3520 penalty, for completeness, is 5% of the inheritance per month late, capped at 25%.

Two things keep those numbers in perspective. First, penalties at the maximum are not automatic; reasonable cause matters, and an heir with no unreported income who genuinely did not know is in a very different position from someone concealing accounts. Second, formal relief paths exist for exactly this situation, including the delinquent FBAR submission procedures and the streamlined filing compliance procedures. Which path fits, and whether your facts qualify, is a determination a cross-border tax professional makes, not a form you guess at. Coming forward through the wrong door can cost more than the miss itself.

Frequently asked questions

Does a foreign inheritance need to be reported to the IRS? The inheritance itself, once, on Form 3520 when it exceeds $100,000 from a foreign estate or nonresident person. The accounts you inherit are then reported annually on FBAR and, above its thresholds, Form 8938, for as long as you hold them.

Do I pay US tax on the inheritance from Israel? The US does not impose income tax on the inheritance itself, and Israel has no inheritance tax. What the US taxes is the income the inherited assets generate afterward. The broader picture is on our page about US tax on an inheritance from Israel.

I closed the Israeli account and moved everything to the US. Am I done? The year of the transfer still counts: the account existed and held funds during it, so that year's FBAR (and possibly 8938) is still owed. After a full calendar year with no foreign accounts above the thresholds, the annual cycle ends.

Does the bank in Israel report me anyway? Israeli financial institutions report US-person accounts under FATCA, which is how mismatches surface. Treat the bank's reporting as a reason to file correctly, not a substitute for filing.

Where a professional takes over

Orientation ends where your account list begins. Which Israeli vehicles are "accounts" for FBAR versus "assets" for 8938, whether the estate period created a filing obligation before distribution, what the highest-balance day was in shekel terms and at which exchange rate, and which relief path fits a missed year: these turn on your documents and dates. A cross-border CPA who works both systems resolves all of it in one sitting, usually alongside the inherited bank account mechanics on the Israeli side. If you want an introduction to a vetted US-Israel tax professional, that is what this site is for.