Inheriting Money or Property Abroad? What US Expats Need to Know

Receiving an inheritance is rarely simple — and for US expats, it can trigger reporting obligations that catch many people off guard.

Does the US Tax Foreign Inheritances?

In most cases, US expats do not pay US income tax on foreign inheritances. Inherited money or property is generally not considered income.

However, that doesn't mean there are no reporting requirements.

Form 3520: The Key Reporting Requirement

If you receive a foreign inheritance exceeding $100,000 from a nonresident alien, you must report it on Form 3520.

This is an informational form, not a tax payment — but failure to file can result in significant penalties (up to 25% of the inheritance amount).

FBAR Implications

If inherited funds are deposited into a foreign bank account, FBAR reporting may apply if the account balance exceeds $10,000 at any point during the year.

Inherited Property Abroad

Inheriting real estate or other property abroad can create:

• Potential capital gains tax if you later sell the property

• Ongoing rental income reporting if you rent it out

• FATCA reporting obligations depending on value

Foreign Estate Taxes

The foreign country where the deceased lived may impose its own estate or inheritance taxes. These are separate from US obligations and vary by country.

In some cases, foreign taxes paid can be credited against US obligations if applicable.

Common Mistakes to Avoid

• Assuming no US reporting is required because no US tax is owed

• Missing the Form 3520 filing deadline

• Failing to report the inherited funds in a foreign account under FBAR

• Not tracking the cost basis of inherited property for future capital gains purposes

Act Before You Receive the Inheritance

Planning before receiving an inheritance — especially for large amounts — can help structure the receipt in a tax-efficient way and ensure all reporting requirements are met from the start.

Exemplary helps US expats navigate foreign inheritance reporting correctly, so a life event doesn't become an unexpected compliance problem.