As discussed in a Forbes article titled “The Power Of Attorney Foreign Account Trap”, as an agent nominated under a durable power of attorney, you may have an important responsibility that you did not know about. If, for example, you are acting as agent for your father who has a foreign bank account, you may be required to file a Report of Foreign Bank and Financial Accounts (FBAR) with the IRS. Failure to do so can result in harsh IRS penalties.
Filing an FBAR is required if the foreign account exceeds $10,000 in value at any point during the year. The form is filed online through the Financial Crimes Enforcement Network branch of the Treasury Department. As agent with authority over a foreign account, you are also required to state that you have this authority on your 1040.
If you do not wish to be responsible for this form, you can add a line to a durable power of attorney stating that your powers as agent exclude power over any foreign account unless the agent expressly accepts it. There is however, some risk to this strategy if the original owner of the account becomes incapacitated, it will likely require a costly and complex legal procedure to gain access to the account.
The potential fine from the foreign account trap demonstrates the important of having a good understating of duties as agent before agreeing to serve. Meet with a qualified elder law attorney before agreeing to serve as agent so you understand your responsibilities and avoid costly mistakes.