How to transfer inheritance money to the US: Taxes, rules, and best practices

If you’ve lost a loved one abroad, you may be worried about the tax implications of bringing your inheritance money back to the US. There’s a lot to navigate, but breaking down the rules can help.

We’ve put together a guide on how to transfer your inheritance money to the US, including everything you need to know about taxes on inheritance and your foreign inheritance reporting requirements.

Transferring money internationally? Open a Wise account to transfer your foreign inheritance across borders in over 40 local currencies.

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Is inherited money taxable in the US?

Inherited money isn’t typically taxable in the US, so beneficiaries won’t have to pay federal taxes on inheritance. However, you may need to look into your reporting requirements when bringing your money back into the country.¹

A handful of US states may also impose their own inheritance taxes on money, property, or accounts received abroad. These states include:

• Pennsylvania
• Kentucky
• Maryland
• Nebraska
• New Jersey²

State inheritance tax generally only applies if the deceased had a connection to that state. Otherwise, you may be able to avoid paying local inheritance tax on your new foreign assets.¹

Estate tax in the US

Your foreign inheritance may be subject to estate tax, particularly if you inherit a large sum of money.

The Internal Revenue Service (IRS) will determine the value of the deceased person’s estate, including assets such as real estate, cash, and retirement accounts. They will then use this value to work out how much tax is due.

Unlike inheritance tax, which the recipient pays, estate tax is covered by the deceased person’s estate before the beneficiary receives their inheritance.

Federal estate tax only applies to estates valued at 15,000,000 USD or more. Tax rates range from 18% to 40%, depending on the value of the estate.

Some individual states may also charge their own estate tax for foreign inheritances.³ You’ll need to look into any local or state estate taxes to ensure everything has been paid before you come to inherit your money.

Do beneficiaries have to pay taxes on foreign inheritances?

Your inheritance shouldn’t trigger US income tax, even when you bring it back into the country. This includes cash, property, and bank accounts.

However, if your inheritance generates income after you receive it, those earnings will be taxable. This is an important distinction – and it’s likely to affect you, no matter how much you inherit.

US income tax on inherited foreign assets

If you receive cash, a foreign bank account, or a foreign brokerage account in your inheritance, you’ll pay income tax on any dividends, interest, gains, or Passive Foreign Investment Company (PFIC) income.

This is passive income earned by a foreign corporation, typically received as dividends, interest, rents, royalties, and other gains. All of these earnings will count as taxable income from the day you officially receive your inheritance.

If you inherit property abroad, you’ll pay tax on rental income or any gains from selling your property. Selling a property abroad will also likely trigger capital gains tax in the US.¹

Speak with a cross-border tax expert to help you understand which earnings will trigger tax obligations, both in the US and internationally.

Critical US reporting requirements for foreign inheritances

Although you may not owe tax on your foreign inheritance, you may still need to report large sums of money or extensive foreign assets to the IRS. These reporting responsibilities aim to reduce tax evasion, money laundering, and fraud.

Let’s take a closer look at your foreign inheritance reporting requirements, including Report of Foreign Bank and Financial Accounts (FBAR) and Foreign Account Tax Compliance Act (FATCA) filing obligations.

IRS Form 3520

You’ll need to file Form 3520 with the IRS if you receive more than 100,000 USD from a non-US person or estate.

If you’ve received a gift from a foreign corporation, you’ll need to file Form 3520 for any assets worth 20,573 USD or more.¹

FBAR Form 114

If your inherited money sits in a foreign bank account before being transferred, and the aggregate balance exceeds 10,000 USD at any point during the tax year, you’ll need to file Form 114.

You can do this via the Financial Crimes Enforcement Network (FinCEN) Bank Secrecy Act (BSA) e-filing system.¹

FATCA Form 8938

If your foreign assets exceed FATCA thresholds, you’ll need to file Form 8938, along with your regular US tax return.¹

Those living in the US must report foreign assets of 50,000 USD or more on the last day of the tax year, or 75,000 USD or more at any point during the year.⁴

Schedule B

You may also need to file Schedule B if you’ve gained more than 1,500 USD of taxable interest or dividends from your inheritance. Schedule B is attached to your regular tax return.¹

How to transfer your inheritance money to the US

So, what is the best way to transfer a large sum of money internationally? You could send a wire transfer or opt for a digital provider like Wise.

While a wire transfer is a secure payment method, you’ll need to look into the cost of sending your money overseas. Most banks add hefty hidden markups to the ‘fair’ exchange rate when converting your money into US dollars.

You’ll also likely pay intermediary or correspondent bank fees for your wire transfer. All of these costs can start to chip away at your total amount.

Open a Wise account to save on transfer fees for your foreign inheritance. Send money back to the US or spend abroad – all at the mid-market exchange rate. This is the rate you see on Google, with no hidden markups.

Step-by-step checklist for managing a foreign inheritance

Inheriting money abroad triggers a few key tax obligations in the US. You likely won’t pay federal tax on your inheritance, but you’ll need to look into estate tax and additional charges levied by your state government.

You may also need to declare your inheritance to the IRS, and you’ll need to work out how best to transfer your inheritance money to the US.

Here’s a checklist for managing your foreign inheritance:

1. Verify the source and total value of your international inheritance
2. Determine if you’ve earned interest or any other income from your inherited foreign assets
3. Consult a cross-border tax specialist to confirm your state and federal reporting requirements
4. Complete IRS Form 3520, FBAR Form 114, FATCA 8938, and Schedule B if required
5. Choose a cost-effective transfer method like Wise to minimize your currency conversion losses

Losing a loved one is never easy, but sorting out any important inheritance paperwork can help you get back to what matters most.

Even though you won’t pay federal taxes on inheritance, you’ll still need to look into any state or IRS reporting requirements, as well as estate tax burdens.

Navigating international tax laws can be complex, so speaking with an international tax specialist is often a smart move. When you’re ready to transfer your funds, using a clear, low-cost platform like Wise can help ensure your money gets where it needs to go.

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*Transaction speed claimed depends on funds availability, approval by Wise’s proprietary verification system and systems availability of our partners’ banking system, and may not be available for all transactions.