Orsbon & Fenninger, LLP

Estate Planning and Estate Administration

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Tax rules for foreign gifts and inheritances

Many North Carolina residents are globally mobile. As a result, some of them might have questions about how property received from outside of the United States may be taxed. Whether a gift or inheritance that is received from another country will be taxed seems to be a particular concern.

The United States does not assess inheritance taxes on transfers by bequests. It also does not impose gift taxes on property that is not located in the country and that is gifted from foreign nationals with no domicile in the United States. However, individuals should be mindful that such gifts or inheritances may be taxed under other tax rules.

One structure for transfers by bequest in the Internal Revenue Code pertains to death transfers by citizens of the United States no matter where they are living when they die. This structure also applies to the estates of foreign nationals living the United States, with some exceptions for transfers to spouses of non-U.S. citizens.

The United States will not impose an estate tax on a transfer by bequest if the decedent who transfers the asset by request is not an American citizen or a foreign national living in the United States. There is also no income tax assessed for inheritances that are brought into the United States. The gift tax rules are applied to any gratuitous transfers by United States citizens and foreign nationals domiciled in the country no matter the location of the transferred asset.

Individuals who are concerned about the estate tax for a complicated inheritance situation should consult with an estate planning attorney. The attorney may counsel a client on how the United States tax laws are applied to certain assets that are received from overseas.

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