ian-mstm

Well, I made an important discovery today... I'm an idiot! Since I successfully navigated US immigration law, I thought that I could also successfully navigate the IRS laws dealing with inheritance taxes... WRONG!

I have a simple question (I hope!) to which I've not yet found a solid answer.

My uncle was a UK citizen and lived in the UK (London) his whole life. He died last year... and I have inherited some money from his estate. I am a dual UK/US citizen (well, I'm also a CDN citizen, but I don't think that matters so much! ) but I have not lived in the UK for over 45 years... and have never paid any UK taxes. The final valuation on his estate was roughly £215,000... my share was a tad under £32,000. Estate taxes and such were paid in the UK prior to distributing money to the beneficiaries.

Do I have to pay any tax on the amount I received? Whether yes or no, do I need to declare this inheritance on my 2008 return?

Ian

Bill_S

Here are some solid answers for you.

No.

No.

meauxna

Ian:

Remember what our good friend Sergeant Schultz says!



bonus Ian-friendly trivia! -->Banner is best remembered for his portrayal of the Luftwaffe prison-camp guard Sergeant Schultz in the TV series "Hogan's Heroes" (1965.) There remains a certain irony: John Banner was Jewish.

Another bit of irony, besides John Banner being Jewish and playing a guard in a POW camp is that like his co-star on Hogan's Heroes, Robert Clary, John Banner was in a concentration camp prior to his release and travel out of Nazi Occupied Germany.

(In the early part of the Nazi control of Germany, a trip to a concentration camp was not an automatic death sentence.) John Banner was lucky to leave just before the Nazi policies changed.

Mr. Banner passed away in his native Vienna on his 63rd Birthday.

md95065

As others have already said "no" - you do not have to pay taxes on money that you receive as an inheritance.

In the US estate taxes are paid by the decedent's estate - no taxes are paid by the recipients.

In this case the estate wasn't even in the US, whatever estate taxes which may have been due in the UK have already been paid and you get to keep every cent of the money that you have inherited.

I also believe (but am not 100% certain) that you do not even have to declare this money because it isn't "income".

snowbunny

One is limited to $10k per year as a gift from someone else but the federal tax is an estate tax, not an inheritance tax.

However you might have Kentucky issues:

http://revenue.ky.gov/individual/inherittax.htm

Not an accountant!

Amy

Bill_S

The IRS imposes no limit on the amount of any gift that can be received.
The donee is not taxed on a gift.

snowbunny

Correct, but if (now) over $12,000 the donor must pay taxes.

Apologies for the confusion.

Bill_S

There will be no issues with Kentucky. The uncle was not a Kentucky resident.

snowbunny

No. Kentucky used to have an *inheritance* tax, too, though. Point being that if in the US, one must consider the laws of one's state as well.

ian-mstm

Y'see... this is one of those areas that confused me. We couldn't find any information in Kentucky law that pertained to us as Kentucky residents when the decedent was a non-resident. I guess I know why now... there's no information because it doesn't exist. Maybe I'm not such an idiot after all!

Thanks everyone for your input. Sheila and I paid off our credit cards and now that we don't have to hold anything back for taxes, my crystal ball says we can afford a vacation this year... and to hell with the price of gas!

Ian

rew1000

Bequests do not give rise to a tax liability for the recipient, but I believe there is an obligation to declare foreign bequests (bit like the requirement to declare foreign bank accounts). See http://www.irs.gov/pub/irs-pdf/i3520.pdf

ian-mstm

Thanks for bringing this to my attention. I am not unfamiliar with this form as I declare my Canadian-held RRSP each year. Fortunately though, I seem to be well under the $100,000 threshold for reporting a bequest from a foreign-held trust, so... whew!

Ian

Tracym

May run it through Turbo-Tax? (including state)