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Receiving an Inherited Property Overseas: How to File With the IRS?

Property Tax Guide

In the happy event that you receive a foreign inheritance, or inheritance from overseas, the IRS takes notice of that too. These are the forms it may ask you to fill out, depending on the amount of your inheritance.

IRS Forms for Foreign Inheritance

Form 706-CE

This form is for you to report any foreign taxes paid on the inheritance received. Note that this applies to taxes paid to the foreign country only not to US tax imposed on that inheritance. The form can be found on the IRS website.

Form 3520

The IRS Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, refers to gifts or bequests valued at $100K or more from non-US citizens. Although the IRS wants you to file the form and penalizes you if you forget, you’re not taxed on inheritance received from a foreign country. Form 3520 is due on the date when your income tax is due, including extensions.

FinCEN Form 114

This form is otherwise known as the FBAR (Foreign Bank Accounts Report). Any U.S. Citizen or Green Card Holder has to report a foreign account that contains more than $10,000. If you become a beneficiary of such an account, you would have to file a FinCEN 11 and hand it to the U.S. Department of Treasury no later than June 30. Note that the foreign estate executor or probate account manager can also transfer your inheritance directly to your U.S-based account in which case you do not need to file any form.

FinCEN Form 104

The Form 104, also known as a Currency Transaction Report, should be filed by your bank when you receive a transfer that exceeds $10K. If you're a beneficiary and expect a large transfer from a foreign account, inform your bank of the nature of the transaction so that the FBI does not inspect you for money laundering.

FinCEN Form 105

The IRS requires that you file Form 105 if you want to fly from a foreign country into the US with money that exceeds $10k, or if you want to deliver more than $10k to the U.S. through an international courier. In all cases, you, or the courier, need to report your monetary inheritance to the Commissioner of Customs or to the Customs Officer when you (or the courier) enter America.

IRS requirements for noting foreign gifts of significant amounts are constantly being updated and modified. If you're the beneficiary of an inheritance from a foreign country, you may want to consult an attorney who specializes in this topic, or review updated requirements to avoid stiff penalties.

OFAC (Office of Foreign Assets Control)

In most cases, bringing or claiming control of a foreign inheritance is simple and straightforward. As mentioned, you’re not taxed nor should there be problems or restrictions, but you should be aware that the U.S. Office of Foreign Assets Control (OFAC) has imposed financial sanctions on certain countries. Take the time to research the active OFAC sanction programs to make sure none apply to you. If you are the beneficiary of an estate in such a country, you may want to consult an attorney who is experienced in dealing with OFAC guidelines.

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