Monday, March 11, 2019
As Americans become more global within this modern society, they are asking estate planners questions about properties outside of the country's borders. One of the popular questions is whether an inheritance or gift from abroad will be taxed if brought into the United States. Usually, bequests are not subject to the income tax, and transfers by gift of property not situated in the U.S. from foreign nationals not domiciled in America are not subject to U.S. gift taxes. But depending on the circumstances, certain laws may still apply.
Foreign nationals who are green card holders are generally considered domiciled in the United States and as such are defined as lawful permanent residents. Residents and citizens are covered by one aspect of the estate and gift tax laws, and national without a green card may be considered domiciled for tax purposes. Transfers by foreign nationals not domiciled in the United States are covered by a different estate tax structure that imposes taxes on transfers of certain property situated in the United States.
If the decedent who bequeaths the asset is neither a U.S. citizen nor a foreign national domiciled in the United States, no U.S. estate tax is imposed on the transfer. There is also no tax resulting from the death transfer upon the beneficiary's receipt of a bequest. The United States also does not impose an income tax on inheritances brought into the country.
The United States has gift tax treaties which may eliminate the U.S. gift tax on certain transfers that are otherwise subject to gift taxes under the Code. An exemption from gift tax under a treaty is made on a gift tax return.
See How U.S. Tax Rules Apply to Inheritances and Gifts from Abroad, Find Law.com.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.