While it is uncommon for parents in the US to grant their minor children signatory authority over bank accounts, in other countries it is common practice to avoid inheritance, transfer taxes, or for other reasons. While this is generally not a problem, it can become an issue when the Internal Revenue Service (IRS) becomes involved. US persons (such as citizens or residents) are required to report information about foreign accounts which they have a signatory authority on an annual basis. If a minor child is a US person (a citizen or resident) and at least one parent is not, then the non-US parent has no US reporting requirements; if the child (or the US spouse) has signatory authority over foreign account(s) the child or US spouse may be required to report details about the account to the IRS.
All US persons, whether they are minors or adults, must file an FBAR annually if the total value of the foreign accounts which they have signatory authority over exceeds $10,000 at any time during the year. The FBAR requires that the child disclose the high balance of the accounts, account numbers, banks and their locations, co-holders of the account, and basic account information. In addition, the fine for failing to file an FBAR ranges from $10,000 up to half the value of the account. The fine may be waived or reduced if the IRS finds there was reasonable cause for the failure to file the FBAR.
In addition, if the child is required to file a US tax return, they may also be required to file Form 8938 and disclose their interest in the foreign accounts. Like the FBAR, Form 8938 is an informational return, but the filing threshold for Form 8938 is much higher. The filing threshold for Form 8938 for an unmarried person residing outside the US is $200,000 on the last day of the year, or $300,000 at any time during the year of specified foreign financial assets exceeds.
Before non-US persons give signatory authority over accounts to US residents or citizens- whether they be spouses, children, family or friends- the account holder should determine whether the US person will have a filing requirement associated with those foreign accounts and, if so, whether they are comfortable with having their account information provided to the IRS.