Bringing inheritance money into the US is not itself a taxable event — federal law does not treat an inheritance as income, no matter where the decedent lived. What trips people up is the paperwork. A wire from a foreign estate over $100,000 triggers IRS Form 3520. Money that lands in a foreign account first can trigger an FBAR. Larger foreign holdings pull in Form 8938. None of these forms cost you tax on the inheritance itself, but missing them carries penalties that can exceed the tax you’d owe on almost any other transaction.
The rules below cover the mechanics of moving the funds, the forms the IRS expects, and the narrower situations (US property in the estate, state taxes, treaty countries) that can change the outcome.
Moving the Funds Into the US
Most international inheritance transfers travel through the SWIFT network. Your foreign bank wires the funds to your US bank using a unique identification code, sometimes passing through intermediary banks that add small relay fees. Both the sending and receiving banks charge fees, but the total is modest against the sums typically involved. Funds usually clear within a few business days.
Any wire over $10,000 will be flagged automatically by your US bank’s anti-money-laundering systems.1Financial Crimes Enforcement Network. The Bank Secrecy Act This is routine. The bank may ask for documentation of the source of funds: a copy of the will, a death certificate, or an estate distribution letter. Having those ready avoids delays.
Carrying Cash Across the Border
If you’re physically bringing cash or monetary instruments into the country, you must file FinCEN Form 105 with US Customs and Border Protection whenever the total exceeds $10,000.2Financial Crimes Enforcement Network. FinCEN Form 105 – CMIR, US Customs and Border Protection There’s no cap on the amount you can carry; the rule is disclosure, not restriction. Failure to declare can result in seizure of the entire sum and criminal prosecution.
Inherited Physical Property
Personal effects such as jewelry or heirlooms from a US citizen who died abroad may enter duty-free under subheading 9804.00.85 of the Harmonized Tariff Schedule.3eCFR. 19 CFR Part 148 – Personal Declarations and Exemptions You’ll need written proof of the decedent’s US citizenship. If the decedent was not a US citizen, standard customs duties may apply based on the item’s value and category. Declare everything either way.
Form 3520: The $100,000 Reporting Threshold
If you receive more than $100,000 in total from a nonresident alien or a foreign estate during a single tax year, you must file IRS Form 3520. This is an informational return. The IRS wants to know about the transfer; it does not tax the inheritance itself. You report the date of each transfer, a description of the property, and its fair market value. Once the annual total crosses $100,000, you must separately identify each individual gift or bequest over $5,000.4Internal Revenue Service. Gifts From Foreign Person
Form 3520 is due by April 15 of the year following receipt. If you live and work outside the US on that date, the deadline shifts to June 15. Filing for an income tax extension pushes Form 3520 to October 15.5Internal Revenue Service. Instructions for Form 3520
The late-filing penalty is 5% of the inheritance value for each month the form is overdue, capped at 25%.4Internal Revenue Service. Gifts From Foreign Person On a $500,000 inheritance, that reaches $125,000 for a form that costs nothing but time.
Foreign banks report account information to the IRS under FATCA, and the $100,000 threshold means the IRS expects a filing from anyone receiving a substantial foreign bequest.
FBAR: When Inherited Funds Sit in a Foreign Account
If your inheritance passes through a foreign bank account you own or control, even briefly, and the combined value of all your foreign financial accounts exceeds $10,000 at any point during the year, you must file FinCEN Form 114, the FBAR.6Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR) The threshold is low, and a single inheritance deposit almost always triggers it.
The FBAR is filed electronically through FinCEN’s BSA E-Filing System, separately from your tax return. For each account you’ll need the account number, the bank’s name and address, the account type, and the maximum value during the year.6Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR) It’s due April 15, with an automatic extension to October 15 (no request needed).
FBAR penalties are where things get serious. The base statutory penalty for a non-willful violation starts at $10,000 per account, per year, with the ceiling adjusted upward for inflation annually.6Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR) Willful violations carry a maximum civil penalty of $100,000 or 50% of the account balance, whichever is greater (again, adjusted for inflation).7Office of the Law Revision Counsel. 31 USC 5321 – Civil Penalties Criminal penalties for willful violations can reach $500,000 and ten years in prison.
Form 8938: Higher-Threshold Asset Reporting
Form 8938, required under FATCA, covers a broader set of foreign financial assets than the FBAR and applies at higher thresholds. For an unmarried taxpayer living in the US, the trigger is foreign financial assets exceeding $50,000 on the last day of the tax year or $75,000 at any point during the year. For married couples filing jointly, it’s $100,000 on the last day or $150,000 at any point.8Internal Revenue Service. Instructions for Form 8938
Living abroad raises the thresholds substantially: $200,000 on the last day or $300,000 at any time for single filers, and $400,000 or $600,000 for joint filers.9Internal Revenue Service. Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets
Form 8938 is filed with your income tax return, not separately. The penalty for failing to file is $10,000. If you still haven’t filed 90 days after the IRS sends notice, an additional $10,000 accrues for every 30-day period, up to $50,000.10eCFR. 26 CFR 1.6038D-8 – Penalties for Failure to Disclose
You may need to file both an FBAR and Form 8938 for the same accounts. They serve different agencies (FinCEN and the IRS), use different thresholds, and one does not substitute for the other.
Converting Foreign Currency
Every dollar amount on your US tax return, including on Form 3520 and Form 8938, must be reported in US dollars. Use the exchange rate in effect on the date you received the funds.11Internal Revenue Service. Foreign Currency and Currency Exchange Rates For a lump-sum distribution, that’s the day the estate paid you, not the date of death and not the date the wire cleared your US bank. For installments, convert each payment on its own receipt date. Keep a written record of the rate you used and where you got it.
When the Estate Owed US Estate Tax
A separate rule can shrink an inheritance before it ever reaches you. A nonresident alien’s US-situated assets — US real estate, tangible personal property located in the US, and certain US securities — may be subject to federal estate tax if their value exceeds $60,000.12Internal Revenue Service. Some Nonresidents With US Assets Must File Estate Tax Returns That threshold sits far below the $13.61 million exemption that shelters US citizens and residents.
Filing Form 706-NA within nine months of death is the executor’s obligation, not the beneficiary’s.13Internal Revenue Service. Instructions for Form 706-NA But the tax reduces what you receive, so ask the estate’s representative whether it applies before you count on the full amount.
State Inheritance and Estate Taxes
Federal rules are only part of the picture. A handful of states impose their own inheritance tax, with rates depending on your relationship to the deceased; close family often pay nothing while distant relatives and unrelated beneficiaries can face rates up to 16%. Roughly a dozen states and the District of Columbia levy a separate state estate tax with exemptions well below the federal figure, some as low as $1 million. These are most common in the Northeast and upper Midwest. Check your state’s tax authority if you live there or the decedent’s property was located there.
Treaty Countries
The US has estate or gift tax treaties with fifteen countries, including the United Kingdom, Canada, France, Germany, Japan, and Australia.14Internal Revenue Service. Estate and Gift Tax Treaties (International) These agreements can shift which country gets to tax the estate, expand the marital deduction for non-citizen spouses, or enlarge the estate tax credit available to the decedent’s estate. Where the decedent lived in a treaty country, US estate tax on the transfer may be significantly reduced or eliminated. Cross-border estate taxation between non-treaty countries gets complicated, and professional help earns its fee.
If You Already Missed a Deadline
Two IRS programs bring late filers back into compliance, and both work better than waiting for a notice.
If you haven’t been contacted by the IRS and aren’t under examination, you can file a late Form 3520 or other international information return through normal procedures with a written reasonable cause statement attached.15Internal Revenue Service. Delinquent International Information Return Submission Procedures Penalties can be waived entirely when the failure resulted from reasonable cause and not willful neglect.16Internal Revenue Service. Failure to File Form 3520/3520-A Penalties Not knowing about the form can qualify, particularly if nothing in your prior filing history would have flagged the requirement.
For taxpayers who also failed to report income from inherited foreign assets or missed multiple years of FBARs, the Streamlined Filing Compliance Procedures offer a broader remedy. You must certify that the failure was non-willful. Taxpayers living outside the US who qualify have all related penalties waived; those living in the US face a 5% miscellaneous offshore penalty but avoid the far larger per-form penalties. The program is closed to anyone the IRS has already begun examining or investigating.17Internal Revenue Service. Streamlined Filing Compliance Procedures
Coming forward voluntarily almost always produces a better outcome than being found.