Inheritances can be bittersweet.
On the one hand, such financial gifts are a tremendous blessing, especially for recent immigrants getting settled in the United States. At the same time, inheritances come at a great cost: the loss of a loved one’s life.
This confluence of emotions can create a cognitive dissonance that distracts from the business at hand. Though a sensitive matter, inheritances must be approached with strategy and caution.
Receiving an inheritance from abroad is not a passive situation.
In fact, it requires due diligence in three areas: verifying the inheritance’s legitimacy (to avoid inheritance scams), identifying potential tax liabilities, and deciding how you’ll transfer the money to the United States.
Whether you recently received a foreign inheritance or expect such a windfall in the near future, this guide will help you prepare with confidence.
First Steps When Receiving An Inheritance
Let’s start with the ground rules.
Step one? Remain calm.
After learning about your inheritance (and your relative’s death), refrain from making any major decisions—or providing personal information to anyone—until after the initial shock subsides.
Inheritance scams thrive on emotional chaos. At this juncture, moving slowly and even maintaining a healthy dose of skepticism will serve you well.
When you are ready, follow these three short steps to take command of the situation:
1. Avoid Inheritance Scams
Maybe you were alerted via email, or it was a phone call.
No matter the contact method, your first task is always the same: to verify the authenticity of the inheritance. Though this might sound paranoid, over 2,500 inheritance scams are perpetrated on unsuspecting victims each year.
The formula is well known: a stranger overseas suddenly contacts you about an “unexpected inheritance” left to you from a relative who shared your last name.
They offer their condolences and describe the large sum of money with your name on it. In some cases, they might even leverage AI voice-cloning techniques to impersonate someone you know.
Whichever approach they take, inheritance scammers typically make two hallmark mistakes:
- They put a time constraint on your cooperation and rush you to take immediate action.
- Then, they request your bank account information to either transfer the funds or to “cover the administrative fees.”
These are both signs of fraud.
If you truly received a foreign inheritance, urgency will never be a factor.
Secondly, even if you recognize the voice on the phone (or the email address), do not give out your personal or financial information. In fact, don’t take any action at all until you have proof of the inheritance and have spoken directly with the executor of the will.
2. Contact an Expert
Don’t have a financial advisor? That’s okay.
Now might be the perfect time to seek professional services to help verify the inheritance, navigate tax responsibilities, and ensure compliance to receive the funds.
Want to find an expert near you?
Simply run a Google search for a local estate attorney, tax professional, or financial advisor. Whatever modest fee structure they have will be worth the investment in both the short-term (as you receive the inheritance) and the long-term (when you must report it to the IRS).
More on that in just a moment.
3. Gather Essential Documents
Whether you choose to hire a professional or do it alone, you will need to collect several key documents in order to proceed.
Standard paperwork typically includes the deceased’s will and death certificate, along with proof of your identity. Each of these documents will be required to claim the inheritance and maintain compliance with the regulations in both countries.
In the vast majority of circumstances, your money will be transferred without hassle.
However, it’s important to review the inheritance laws of the originating country and ensure it’s not on the U.S. Office of Foreign Assets Control (OFAC) sanctions list.
If your inheritance does originate from a sanctioned country, you may want to consult an attorney before starting the transfer process.
Foreign and U.S. Inheritance Laws & Taxes
In most cases, you will not have to pay tax on foreign inheritance.
Any owed amounts will be handled by your relative’s estate and paid in their home country before it’s ultimately transferred to you in America.
Nevertheless, while most foreign inheritances won’t be taxed, you will still have to report them to the Internal Revenue Service (IRS) in the following situation:
- If the total value of your inheritance (and any other foreign gifts) exceeds $100,000 in a given year.
- If your foreign gifts exceed $100,000, use IRS Form 3520 to file this information.
Again, these inheritances are not taxed—only reported.
Be aware that any incorrect or delayed reporting may be subject to a monthly penalty of 5% of the total gift value.
Exception: When You Might Have To Pay Taxes
There is only one situation where you may have to pay tax on foreign inheritance.
If the gift came from an individual who renounced their U.S. citizenship—or who formerly held a green card—you may be subject to additional taxes.
Here’s why: according to the Internal Revenue Code (IRC), these individuals are considered “covered expatriates,” or former citizens who left the United States with a net worth over $2 million.
If you have received an inheritance (or any financial gift) from a covered expatriate, seek tax and legal counsel to ensure you’re in compliance with IRS regulations.
A Brief Word on International Tax Rates
Inheritance taxes vary from country to country, and there are no “set” rates as you transfer funds to the U.S.
This is important to consider so you’re not surprised by the final sum you receive.
For example, Japan leads with a 55% inheritance tax rate, with the United Kingdom close behind at 40%. On the opposite end of the spectrum, Bulgaria maintains inheritance tax rates between 0.04 to 0.8% (depending on the relation to the deceased).
Still, while some nations maintain steep taxes, others have no inheritance tax laws at all—including Mexico, India, and Australia.
Transferring The Inherited Money
You’ve successfully completed your due diligence.
You authenticated the inheritance, gathered your essential documents, and sought professional counsel. Now that everything is in order, it’s time to choose how you’d like to receive the inheritance.
There are three primary options at your disposal.
Request a Check
This method requires some patience, as international checks take 4 to 6 weeks to clear.
The delay is often prolonged by international banking regulations, AML protocols, and byzantine verification processes between banks. Because checks are an outdated payment method, they struggle to compete with digital channels.
Despite their sluggish speed, checks can still provide a major benefit.
If the exchange rate tilts in your favor, request a check issued in your relative’s local currency. That’s how you can maximize the value of their gift and turn their hard-won labor into more U.S. dollars.
Use Your Traditional Bank
Though an easy way to repatriate funds, this might also be the most expensive.
After all, banks will charge hefty fees for both the initial transaction and currency conversion costs. To avoid surprises, be sure to ask for your bank’s fee structure prior to authorizing the transaction.
Timing is also a concern, as banks sacrifice speed for reliability. Though faster than a check, banks take at least 3 to 7 business days to complete an inheritance transfer.
In the age of cross-border payments, that’s an eternity.
Explore Digital Money Transfer Services
Welcome to the best of both worlds.
While combining the affordability of checks with the reliability of traditional banks, digital money transfer services add lightning-fast speed to the equation.
While providing low fees (with great exchange rates), international money transfer apps can complete major transactions in as little as 24 hours.
Plus, thanks to advanced encryption protocols, digital money transfer services maintain the highest security standards (without the delays of legacy methods).
Best of all, these platforms are user-friendly, deliver transparent pricing, and unlock real-time tracking—the perfect combination for transferring large sums like an inheritance.
Preserving Legacy With uLink
Receiving an inheritance from abroad can be a life-changing event.
For recent immigrants, an inheritance provides financial hope for the future while perpetually honoring the past.
Still, while receiving an inheritance from abroad can be emotional, we encourage you to remain strategic until you verify its authenticity.
We live in an age of digital crime where thieves leverage the goodness of others to turn a profit. Avoid inheritance scams by speaking to the executor of the will, hiring an estate attorney, and gathering essential documents that leave no room for doubt.
And when it comes time to transfer the inheritance?
Partner with uLink: the fast and affordable way to send money around the world.
With the all-new uLink SuperApp, sending and receiving money abroad is a breeze—whether you’re making small recurring amounts to support your loved ones back home or a large, one-time transaction.
Get great exchange rates, low fees, and zero hidden fees.
Send more—pay less.