What Happens if You Inherit Money from Another Country?

Suppose you inherited money from another country. Well, what happens next? If you’re an American citizen living in the United States or overseas, there may be several forms you have to fill out. Besides that, your responsibilities are few. That being said, knowing which forms to complete can be difficult.

Once you’ve inherited money from another country, it’s best to consult with an experienced accountant. A professional can assess the sum or value of an inheritance and advise you on which IRS Forms you need to complete. For example, IRS Forms 3520 and 8938 are common requirements when receiving an inheritance. In addition to reporting to the IRS, you may also need to report to other federal agencies. Though you might have to report the money you’ve inherited from another country, you probably won’t have to pay American taxes on it.

The CPAs for American expatriates at US Tax Help can let you know what happens if you inherit money from another country. For guidance on how to report a foreign inheritance, visit us online or call the CPAs for American expatriates at US Tax Help today at (541) 362-9127.

What Happens When You Inherit Money from Another Country?

Receiving an inheritance can become complicated quickly. Depending on your country of residence, you may have to navigate multiple tax codes. Regardless of where they live, American citizens must comply with the United States Tax Code when receiving an inheritance from another country.

So, what happens when you inherit money from another country? The first step is to determine whether or not you have to report it. Researching IRS regulations by yourself can be confusing; not every American citizen understands tax jargon. That’s why enlisting the help of a skilled accountant, like the CPAs for American expatriates at US Tax Help, is wise. A professional can assist you in navigating the required forms and help you adhere to the filing guidelines.

Inheriting a large sum of money can make you vulnerable to fines and penalties, should you fail to report it properly. If you do report the money you’ve inherited from another country correctly, that’s the end of the process. Your responsibility is to report it, if necessary. After that, you can enjoy your inheritance without worrying about penalties. That being said, knowing how and what to report isn’t always easy.

Do You Have to Report Money You Inherit from Another Country?

If you inherit money from a loved one from another country, you may have to report it. The IRS requires American citizens to report a foreign inheritance over a certain amount. So, if you’re an expatriate living overseas and have received an inheritance that is over the threshold, you must report it to the IRS. Depending on where you decide to hold the funds, you may also have to report an inheritance to another federal agency.

IRS Form 3520 applies to American citizens who have inherited over $100,000 from another country. Even expatriates who live abroad must report an inheritance over that sum to the IRS. The IRS requires you to report money that you’ve inherited for informational purposes. If the money you have inherited will remain in a foreign bank account because you’re an expatriate, you may also have to file other forms.

IRS Form 8938 compels American citizens to report their foreign financial assets if they exceed a certain amount. American expats must file Form 8938 if:

  • they’re filing independently and their aggregate foreign financial assets exceed $200,000 on the final day of the tax year or were above $300,000 during the tax year, or
  • they’re filing jointly and their aggregate foreign financial assets exceed $400,000 on the final day of the tax year or were above $600,000 during the tax year.

If the money you’ve inherited from another country is less than $100,000 or did not greatly increase your foreign financial assets, then you won’t have to report it to the IRS. That being said, you may have to report it to another federal agency. The Financial Crimes Enforcement Network (FinCEN) monitors American money overseas. If you transfer a foreign inheritance to an American bank account, you may have to complete FinCEN Form 104. You can always ask for the guidance of an experienced accountant, like the CPAs for American expatriates at US Tax Help. Properly reporting money you’ve inherited from another country is important so that you can avoid unnecessary fines and penalties.

Can the Money You Inherit from Another Country Be Taxed?

While you may have to report money that you’ve inherited from another country to the IRS or FinCEN, you may not have to pay taxes on it. The IRS doesn’t tax foreign inheritances, but individual states might. That being said, you may have to pay taxes on an inheritance if you live in another country.

Generally, the IRS doesn’t touch foreign inheritances. However, if you fail to report the money you’ve inherited from another country, you may incur fines. For each month that you fail to report your inheritance, you can be fined 5% of its sum. Those fines can add up quickly. Taxpayers can avoid penalties by working with experienced accountants, like the CPAs for American expatriates at US Tax Help. Paying fines on an inheritance can greatly reduce its sum.

When money is transferred from a foreign bank account to an American one, it can be taxed. That’s why it is important to report inherited money to the IRS. Of course, expatriates may no longer have American bank accounts as they live overseas. In that case, the IRS will not tax money you’ve inherited from another country. That being said, it is important to know the tax code of your current country of origin. Each nation has different laws regarding inheritances. For example, the America operates within a citizen-based taxation system. That means that all citizens, regardless of where they live, must remain compliant with the United States Tax Code.

Other countries can abide by the same tax system or by a residency-based taxation system. Regardless, you may be obliged to comply with the tax laws of your country of residence. It’s important to be aware of all tax codes that may apply to you when you inherit money from another country as an American expatriate.

Our CPAs Can Tell You What Happens if You Inherit Money from Another Country

After inheriting money from another country, it’s important to know what comes next. Our team can make reporting a foreign inheritance easy. To learn more, the experienced CPAs for American expatriates at US Tax Help, visit our website or call today at (541) 362-9127.