How to Transfer Inheritance Money to the US: Form 3520, FBAR, and Basis

To transfer inheritance money to the US, you send the funds by international bank wire from the foreign estate to your U.S. account once the foreign probate court has authorized the distribution, then file the required informational returns with the IRS and FinCEN after the money lands. The transfer itself is not usually taxable to you as the recipient, but reporting is mandatory above certain thresholds, and the penalties for missing a form are far worse than the effort of filing one.

Documents to Gather Before the Wire

Line up the paperwork before anyone initiates a transfer. U.S. banks are required to verify the source of large incoming international funds, and an unexplained six-figure wire is exactly the kind of transaction that triggers extra scrutiny.1Federal Deposit Insurance Corporation (FDIC). Customer Identification Program

You will need an official death certificate from the country where the decedent lived. If it is in another language, get a certified English translation. Most U.S. banks also want the document to carry an Apostille, the standardized certificate used under an international treaty to confirm foreign signatures and seals are authentic. Countries that are not parties to that treaty use consular authentication instead.

You also need a grant of probate or the equivalent foreign court order showing the executor has authority to distribute the estate and that you have a recognized right to the inheritance. Without it, the receiving bank is likely to reject the deposit.

Both banks will want identification. A U.S. passport or Individual Taxpayer Identification Number ties the transaction to a verified person on this side; the sending institution will typically need the executor’s ID as well.2FFIEC BSA/AML Manual. Assessing Compliance with BSA Regulatory Requirements – Funds Transfers Recordkeeping Getting everything notarized and properly formatted upfront prevents the back-and-forth that can delay funds for weeks.

Moving the Money

The standard method is a bank-to-bank wire through the SWIFT network, the global messaging system banks use to send payment instructions. Give the foreign executor or bank your full legal name, the physical address of your U.S. bank, its ABA routing number, and its SWIFT code (sometimes called a Business Identifier Code). Funds usually clear in three to five business days. The timeline stretches when the money passes through intermediary banks, which happens with smaller foreign institutions that lack a direct relationship with U.S. banks, and each intermediary along the chain may deduct a processing fee.

For large transfers, a currency exchange specialist is worth pricing against your bank. Retail banks typically add a markup to the exchange rate, while specialized firms often use rates closer to the mid-market rate and charge lower percentage fees. They receive the foreign currency locally and disburse dollars from their U.S. reserves, which can also reduce the number of intermediary stops.

Exchange rate movement matters when probate abroad drags on. Money that sits in a foreign account for months can be worth noticeably more or less by the time it reaches you. Some currency brokers offer forward contracts that lock in a rate for a set period; they may require a deposit, but for a six-figure inheritance the predictability is often worth the cost.

What You Report to the IRS After the Money Arrives

Three federal forms can apply. None of them creates a tax bill on its own; they are informational. But you have to file the ones that apply, and the thresholds trigger separately.

Form 3520 for the Inheritance Itself

If you receive more than $100,000 from a foreign individual or estate during the tax year, you must file Form 3520.3Internal Revenue Service. Gifts from Foreign Person The form asks for the date of transfer, a description of the property, and its fair market value.4Internal Revenue Service. Instructions for Form 3520 – Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts It is mailed separately from your income tax return to the IRS Service Center in Ogden, Utah, and it is due when your income tax return is due, generally April 15, with the same extensions available.

FBAR for Foreign Accounts You Touch

If you have a financial interest in, or signature authority over, foreign accounts whose combined value exceeds $10,000 at any point during the year, file FinCEN Form 114, the FBAR.5Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR) Inheritance situations pull people in when they briefly control a foreign estate account, or when the inherited funds sit in a foreign account opened to receive them. Each account is valued separately using the Treasury’s end-of-year exchange rate, and the sum of every account’s peak value determines whether you cross the threshold.6FinCEN. Reporting Maximum Account Value The FBAR is filed electronically through FinCEN’s BSA E-Filing System, not with your tax return. It is due April 15, with an automatic extension to October 15 that requires no separate request.

Form 8938 for Larger Foreign Asset Holdings

Form 8938 overlaps with the FBAR but has higher thresholds and goes to the IRS with your tax return. A single filer living in the U.S. files when foreign financial assets exceed $50,000 on the last day of the tax year or $75,000 at any point during the year. For married couples filing jointly, those figures are $100,000 and $150,000.7Internal Revenue Service. Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets Form 8938 covers a broader range of assets than the FBAR, including foreign stocks, partnership interests, and financial instruments.8Office of the Law Revision Counsel. 26 USC 6038D – Information With Respect to Foreign Financial Assets

Penalties for Missing the Filings

The reporting is technically informational, but the penalties are the reason it is not optional in practice.

Failing to report a foreign gift or bequest on Form 3520 can cost 5% of the gift’s value for each month it goes unreported, up to a 25% cap.3Internal Revenue Service. Gifts from Foreign Person On a $500,000 inheritance, that is $25,000 a month, capping at $125,000. The IRS can also determine the tax consequences of the receipt independently, which can mean reclassifying the inheritance as taxable income when you have not documented otherwise.

Non-willful FBAR violations carry a civil penalty of up to $10,000 per violation.9Office of the Law Revision Counsel. 31 USC 5321 – Civil Penalties Willful violations run to the greater of $100,000 or 50% of the account balance at the time of the violation. Willful criminal failure to file can bring fines up to $250,000 and imprisonment of up to five years.10Office of the Law Revision Counsel. 31 USC 5322 – Criminal Penalties

Missing Form 8938 triggers an initial $10,000 penalty, with up to $50,000 more if you still have not filed after IRS notice. Any underpayment of tax tied to undisclosed foreign assets is subject to an enhanced 40% accuracy penalty.11Internal Revenue Service. FATCA Information for Individuals

Form 3520 penalties can be waived if you show reasonable cause and no willful neglect, submitted in a written statement under penalty of perjury.12Internal Revenue Service. Failure to File the Form 3520/3520-A Penalties Simply not knowing about the form is a weak argument alone. A foreign country’s disclosure prohibitions do not qualify as reasonable cause.

When a Foreign Inheritance Is Actually Taxed

The default is no federal tax on the recipient, but there are situations that override it.

If the person who left you the inheritance was a former U.S. citizen or long-term permanent resident who expatriated and qualifies as a “covered expatriate,” the inheritance can be hit with a transfer tax at the top federal estate tax rate, currently 40%.13Office of the Law Revision Counsel. 26 USC 2801 – Imposition of Tax An annual exclusion shelters smaller amounts; anything above is taxable.3Internal Revenue Service. Gifts from Foreign Person

When a foreign decedent owned property physically in the United States, the estate itself may owe federal estate tax on those assets. U.S.-situs property includes U.S. real estate, tangible personal property located here, and stock in U.S.-organized corporations even if the certificates sat abroad.14Internal Revenue Service. Some Nonresidents With U.S. Assets Must File Estate Tax Returns The estate files Form 706-NA if those U.S. assets exceed $60,000, a threshold not adjusted for inflation.15Internal Revenue Service. Estate Tax for Nonresidents Not Citizens of the United States This is the estate’s obligation rather than yours, but it can reduce what reaches you. Tax treaties with the decedent’s country sometimes lower or eliminate the tax through credits or higher exemptions.

If the inheritance passes through a foreign trust rather than directly from the estate, the picture changes. Distributions from a foreign non-grantor trust are generally taxable to the extent of the trust’s distributable net income, meaning you may owe income tax on some or all of what you receive.16Internal Revenue Service. Foreign Trust Reporting Requirements and Tax Consequencesa> You report the distribution on Form 3520 and complete Schedule B of your Form 1040. If you are treated as the U.S. owner of a foreign trust under the grantor trust rules, the trust must file Form 3520-A by the 15th day of the third month after its tax year ends. If it does not, you attach a substitute Form 3520-A to your own Form 3520 to avoid a penalty equal to the greater of $10,000 or 5% of the trust assets treated as owned by you.17Internal Revenue Service. Instructions for Form 3520-A Certain tax-favored foreign retirement trusts, including Canadian RRSPs and RRIFs, are exempt from Forms 3520 and 3520-A, though FBAR and Form 8938 obligations still apply.

A handful of states impose their own inheritance tax, with rates tied to your relationship to the decedent. Spouses and close relatives are typically exempt or taxed at lower rates; more distant beneficiaries can face rates as high as 16%. The federal government will not flag this for you, so check with your state tax authority directly.

Cost Basis When You Inherit Property Instead of Cash

When you inherit property rather than money, your tax basis is generally the fair market value on the date of death.18Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent This step-up applies to property from foreign decedents even when the property was never subject to U.S. estate tax.19Internal Revenue Service. Basis of Assets

The effect is significant. If your parent bought a home abroad decades ago for $50,000 and it was worth $400,000 when they died, your basis is $400,000. Sell for $420,000, and capital gains tax applies only to the $20,000 difference. One exception: if you gave the property to the decedent within a year before their death, the basis reverts to what the decedent originally paid. Get a formal appraisal at the time of death and keep it permanently.

Deadlines and Records

The standard IRS retention window is three years from filing, extended to six years if you underreport gross income by more than 25%.20Internal Revenue Service. How Long Should I Keep Records International reporting draws more scrutiny, so keep wire confirmations, filing receipts, foreign probate records, exchange rate documentation, and asset appraisals for at least six years. Appraisals used to establish date-of-death basis should be kept permanently, because you will need them whenever the inherited property is eventually sold.