How to Bring Inheritance Money Into the US

Bringing inherited money into the United States from abroad involves navigating financial and regulatory considerations. Understanding these aspects is important to ensure a compliant and efficient transfer of assets.

Understanding US Tax Rules on Inherited Assets

The United States federal income tax system does not impose a tax on the recipient of an inheritance. If a U.S. person receives assets from a foreign estate, the receipt itself is not considered taxable income at the federal level. This applies regardless of the inherited assets’ value.

While the inheritance itself is not subject to federal income tax, any income generated by these inherited assets after receipt is taxable. For instance, interest earned on inherited cash, dividends from inherited stocks, or rental income from inherited real estate are subject to U.S. income tax. If inherited property is sold for a gain after receipt, capital gains tax may apply to the appreciation in value since the decedent’s death.

While the U.S. federal government does not levy an inheritance tax on the recipient, some individual states may impose their own inheritance or estate taxes. The foreign country where the inheritance originated may also have imposed its own taxes before distribution. These foreign taxes are distinct from U.S. tax requirements and do not affect the U.S. federal income tax treatment for the recipient.

Required Documentation and Information

Gathering specific documents and information is a preliminary step when preparing to bring inherited money into the United States. These materials prove the inheritance’s legitimacy and are necessary for financial institutions and governmental inquiries. A death certificate establishes the legal fact of the decedent’s passing.

A will, if one exists, or other probate documents from the foreign jurisdiction are crucial as they detail the decedent’s wishes regarding asset distribution. If the inherited assets were held within a trust, copies of the trust agreement clarify the terms of asset ownership and distribution. These documents demonstrate the legal right to receive the inheritance.

For monetary assets, bank statements from the originating foreign account are important to show the source of funds and the history of the inheritance. Any statements or receipts related to foreign inheritance or estate taxes paid in the country of origin should also be collected. Maintaining comprehensive records of all aspects of the inheritance process is advisable, as these may be required for various reporting and transfer procedures.

Reporting Foreign Inheritances to US Authorities

U.S. persons who receive large inheritances from foreign sources have specific reporting obligations to U.S. authorities, even if no tax is due on the inheritance itself. One key requirement is filing Form 3520, “Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts”. This informational return is necessary if the aggregate amount received from a foreign individual or foreign estate exceeds $100,000 in a calendar year. The form also applies to gifts or bequests from foreign corporations or partnerships exceeding a lower threshold.

Form 3520 is filed separately from an individual’s income tax return and cannot be submitted electronically; it must be mailed to the Internal Revenue Service (IRS). The due date for Form 3520 is the 15th day of the fourth month following the end of the U.S. person’s tax year, typically April 15th. If an extension is granted for filing the income tax return, the due date for Form 3520 is also extended.

Failure to timely file Form 3520 or providing incomplete or incorrect information can result in significant penalties. Penalties can be substantial, with an initial penalty generally equal to the greater of $10,000 or a percentage of the gross value of the unreported amount. For foreign gifts and bequests, this penalty can be 5% of the unreported value per month, capped at 25%.

Another reporting requirement involves FinCEN Form 105, “Report of International Transportation of Currency or Monetary Instruments”. This form must be filed if a person physically transports, mails, or ships currency or other monetary instruments exceeding $10,000 into or out of the United States at one time. The $10,000 threshold applies to the total amount, whether in U.S. or foreign currency, and includes various monetary instruments like traveler’s checks, money orders, and negotiable instruments.

Travelers carrying currency or monetary instruments above the threshold must file FinCEN Form 105 with a Customs and Border Protection (CBP) officer at the time of entry into or departure from the United States. For recipients of such instruments, the form must be filed within 15 days after receipt. Failure to file FinCEN Form 105 or filing a false report can lead to severe civil and criminal penalties, including fines, imprisonment, and seizure or forfeiture of the currency or monetary instruments.

Transferring Inherited Funds to the US

Once reporting obligations are understood, moving inherited funds into the United States typically involves electronic transfers. Wire transfers from foreign banks to U.S. bank accounts are a common and secure method for moving large sums of money internationally.

To initiate an international wire transfer, the sending foreign bank will require specific details about the recipient’s U.S. bank account. This information generally includes the beneficiary’s full name and address as it appears on the account, the U.S. bank’s name and address, the beneficiary’s account number, and the U.S. bank’s SWIFT/BIC code. The SWIFT/BIC code is a unique identifier for financial institutions worldwide, ensuring the funds are routed to the correct bank.

U.S. financial institutions are subject to Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations, which require them to verify the source of large incoming funds. When a significant inheritance is received, the U.S. bank may inquire about the origin of the funds to comply with these regulations. The documentation gathered in the preparatory phase, such as wills, probate documents, and foreign bank statements, can effectively address these inquiries by demonstrating the legitimate source of the inheritance.

Considerations such as exchange rates and transfer fees are relevant when moving funds from a foreign currency to U.S. dollars. Banks and transfer services may offer different rates and charge varying fees, so comparing options can be beneficial. Physically transporting large sums of inherited cash into the U.S. is discouraged due to the reporting requirements of FinCEN Form 105 and the risks of loss or theft.