Laws Concerning Inheriting Money from Overseas

By Brette Sember

Laws Concerning Inheriting Money from Overseas

By Brette Sember

If you inherit money or assets that are located outside of the United States, you may be unsure about your responsibilities when it comes to taxes, as well as what you need to do to obtain legal ownership.

Before you do anything else, first, be sure this is a legitimate inheritance from someone you know or are related to. There are many internet scams involving emails that fraudulently claim you are the recipient of an overseas inheritance and ask you to supply personal information or money to receive it. Always check with an attorney if you are unsure about the veracity of an inheritance.

Estate Taxes

The U.S. federal estate tax applies to estates of American citizens and residents, so if the person you are inheriting from is a citizen or resident, the estate tax applies to assets they own both in and outside of the U.S. However, any amount up to $11.58 million is exempt from federal estate taxation. Estate tax is paid by the estate of the person who died, so if you inherit property that exceeds the exemption, it's up to the estate to pay the taxes.

Twelve states and the District of Columbia currently have estate taxes. Just as with the federal estate tax, responsibility for paying the tax rests with the estate if the inheritance is over the state exemption level. These states and districts are:

  • Connecticut
  • District of Columbia
  • Hawaii
  • Illinois
  • Maine
  • Maryland
  • Massachusetts
  • Minnesota
  • New York
  • Oregon
  • Rhode Island
  • Vermont
  • Washington

If you inherit foreign property from a person who is not a citizen or resident of the U.S., then U.S. estate tax does not apply, but there may be estate taxes applied in that person's home country or the country where the assets are located. If you inherit a property in the U.S. held by a noncitizen or nonresident, the U.S. estate tax may apply, but it depends on the type of asset, so you should consult an attorney if you have questions.

Inheritance Taxes

As the beneficiary of an inheritance, you are not responsible for estate taxes. An inheritance tax, however, is a tax imposed on the person who inherits the money or assets. Although there is no federal inheritance tax, you may not be off the hook completely, as six states currently have an inheritance tax:

  • Iowa
  • Kentucky
  • Maryland
  • Nebraska
  • New Jersey
  • Pennsylvania

The country where the assets are held may also have an inheritance tax you may be responsible for, so check with an attorney in that country for assistance.

Required Declarations

Even though you aren't paying estate tax and may not be paying an inheritance tax, there are a few steps you need to take to notify the Internal Revenue Service (IRS) that you are inheriting foreign assets:

  1. Declare foreign inheritance taxes. If you pay an inheritance tax to the country where the assets are located, you need to declare that payment to the IRS, which will then credit you for that amount against any tax you have to pay on the asset in the U.S. Use Certificate of Payment of Foreign Death Tax (Form 706-CE) for the declaration.
  2. Declare the transfer of assets. When you transfer money into the U.S. from a foreign inheritance that exceeds $100,000, you are required to file Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts (Form 3520) to declare the transfer.
  3. Report ownership to the Treasury Department. Anyone who holds more than $10,000 in foreign accounts must declare ownership to the U.S. Treasury Department using a Report of Foreign Bank and Financial Account (FBAR) on FinCEN Form 114. You also need to notify the department if you are carrying $10,000 or more in cash into the U.S. from an inheritance.

Inheriting money from another country can be a great benefit, but it's important to understand your responsibilities for taxes and government filings.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.