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Inheritance from the UK from deceased mother

Inheritance from the UK from deceased mother

Old Nov 26th 2012, 2:34 pm
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Default Inheritance from the UK from deceased mother

My mother, a UK citizen living in the UK, passed away a few months ago. We have a UK probate lawyer who is dividing the assets between us 3 siblings. Should we ask this UK probate lawyer for some receipt explaining the asset breakdown, if so what form should we ask for?

Today, I received the first wire transfer of assets which exceed $100,000. The lawyer has held back some monies for anything that comes up requiring payment. My mothers flat is currently going thru a sale at the moment with those monies being distributed hopefully in December. The instructions for form 3250, seem to mention that you file as soon as you receive the assets. Does that mean that I need to file a form 3250 for each time a wire transfer occurs. The first amount has already appeared so am confused should I wait and file when filing taxes next year or do a form know?

I am aware that there is a form 3250 that need to be reported to to the IRS. I am assuming that since assets are over $100,000 then this needs to be filled out. Is it best to wait until all assets are distributed assuming by years end and add them as a total sum on this form? Is it advisable to get a tax accountant?

I had read someone say that there is another form 8938 that needs be filled out. All of this is starting to make my headache.

Has anyone else had to deal a deceased relatives estate?

Last edited by thebrit123; Nov 26th 2012 at 2:47 pm.
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Old Nov 26th 2012, 3:01 pm
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Default Re: Inheritance from the UK from deceased mother

My condolences.

I would get a good CPA on your case pronto, preferably before any further distributions are made, to ensure that you're filing your taxes the right way.
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Old Nov 26th 2012, 3:15 pm
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Default Re: Inheritance from the UK from deceased mother

In your prior thread on this topic, I indicated this re what you should receive from the UK executor with regard to the distribution:

"When I was in a similar position, at the time the Executor wired my share to me he sent a statement along with the Revenue Form R185 which he had filed. His instruction to me was that I had to declare on my tax return the net income during the Administration Period (he gave me the number), along with the fact that the UK tax was paid (again he provided the number). I just provided that information to my accountant when she prepared my return that year."

All the US paperwork was filed with my annual April 15 tax return. I do suggest that you talk to your usual tax accountant, and if you do not use one, perhaps have a consultation for this year to get it straight how you should proceed. (Perhaps Peter Newtown, who is often recommended on here for ex-pat tax concerns, might be able to guide you via a one-time consultation if that is all you need.)
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Old Nov 26th 2012, 4:27 pm
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Default Re: Inheritance from the UK from deceased mother

I called the IRS and was told that I would need to fill out form 3520. With regards to form 8938, he said that this form is still in draft, and that he had no training in the specifics. He did refer me to the pdf for that form. It seems to mention that you can use form 8938 and just specify that you have filled out 3520.

Since the form 8938 is so new, I am worried that tax accountants would not be familiar with it. Also form 8938 seems to refer to foreign assets that I own. With regards to my mothers estate, my older sister is the executor, she live in the UK, and the probate lawyers who are handling the funds. These lawyers have taken over all her accounts and have been closing them with the monies going into the lawyers bank account. From this account, they are distributing the monies. I feel that since I don't have the foreign assets in my name then only form 3520 needs to be filled out.
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Old Nov 26th 2012, 5:48 pm
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Default Re: Inheritance from the UK from deceased mother

If you receive an inheritance of more than $100,000 from outside the U.S. you have to report it to the IRS on Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. This is an informational form and does not affect your taxes. You should file this form with the income tax return you file for the year in which you receive the inheritance
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Old Nov 26th 2012, 6:54 pm
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Default Re: Inheritance from the UK from deceased mother

You should add up all the inheritances you receive in 2012 and if they add up to over $100k report them on your 2012 return on form 3520. If you receive further inheritances greater than $100k they would go on you 2013 taxes.

There is uncertainly whether you have to report this on 8938 or FBAR, so I'd go ahead and file them to cover your a$$.

If any part of the money you get from the estate is interest earned in probate
then you have to report that separately as foreign interest income on Schedule B and Schedule D. You should make sure the executors do not deduct UK tax from that interest if you are not subject to UK tax by giving them a form R105. http://www.hmrc.gov.uk/forms/r105.pdf
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Old Nov 28th 2012, 11:33 pm
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Default Re: Inheritance from the UK from deceased mother

The 8938 is not in draft. The form has been mandatory from 2011 returns onwards. Arguably you own beneficial interest in the estate assets so this is a financial asset reportable on an 8938. File both this and the 3520.
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Old Nov 29th 2012, 2:16 pm
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Default Re: Inheritance from the UK from deceased mother

Originally Posted by Cook_County View Post
Arguably you own beneficial interest in the estate assets...
A beneficiary of an estate has no control or interest in the actual estate. A beneficiary has an interest only once a disbursement is made. Whatever is left in the estate after an initial disbursement is still under the control of the estate... not the beneficiary.

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Old Nov 29th 2012, 2:32 pm
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Default Re: Inheritance from the UK from deceased mother

Originally Posted by ian-mstm View Post
A beneficiary of an estate has no control or interest in the actual estate. A beneficiary has an interest only once a disbursement is made. Whatever is left in the estate after an initial disbursement is still under the control of the estate... not the beneficiary.

Ian
The professional opinion seems to be that 8938 is required. I don't fully understand the reasoning, but I think there's a "cover your a$$" aspect to it as they then go on to advise FBAR too and I can't see where there's any signature authority .
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Old Nov 29th 2012, 5:32 pm
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Default Re: Inheritance from the UK from deceased mother

Originally Posted by nun View Post
The professional opinion seems to be that 8938 is required. I don't fully understand the reasoning, but I think there's a "cover your a$$" aspect to it as they then go on to advise FBAR too and I can't see where there's any signature authority .
I'm sure there's a CYA aspect to it and there's certainly no harm in filing the forms if it'll help you sleep better at night... but we should be cautious in suggesting these are required filings in the case of an inheritance - because that's not accurate. A beneficiary has neither control over nor signature authority over an estate.

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Old Nov 30th 2012, 2:26 am
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Default Re: Inheritance from the UK from deceased mother

Originally Posted by vegas View Post
If you receive an inheritance of more than $100,000 from outside the U.S. you have to report it to the IRS on Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. This is an informational form and does not affect your taxes. You should file this form with the income tax return you file for the year in which you receive the inheritance

There may be no federal tax impact, but there might be an impact on state tax. Some states tax inheritances received.
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