FBAR Part II and III Reporting for Title Owners who Are Not Beneficial Owners (6/18/11)

I have recently encountered an issue as to how the FBAR is to be completed in the following circumstance:

W reside in Europe. H is not a U.S. Citizen; W is a U.S. citizen. H has accounts in which he has all beneficial interest under the local law of the country in which they reside. W is listed as an account owner on his accounts, but in fact that is just to give her access to the funds if something happens to H. It is designed to serve as a testamentary disposition to W in the event of H's death; it could also serve as a way for W to access the funds for H's benefit in the event of H's becoming incapacitated. W made no deposits into the accounts, made no withdrawals, and has done nothing with the accounts and is not expected or authorized, as between W and H, to do so until those events. Bottom line, the mechanism of naming W as an account owner at the bank does not give W any ownership interest in the account. It does permit the bank to take instructions from W (including withdrawals).

The question is how W must make an FBAR report? I think all of us recognize instinctively that the FBAR requirement was designed to flush out a report from W, because W certainly has signature authority over the account. I address here how W reports on the form because there has been some confusion about that. For those not interested in the details, here is the bottom line. W should report on Part III in this instance and, if W were the sole title owner (but not beneficial owner), W should report on Part II. There is some nuance behind this bottom-line, so the following discussion may be important to some.
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