Estate and Gift Taxes and Foreign Funds Transfers


U.S. citizens and resident aliens living overseas are subject to U.S. estate and gift tax laws. Most people won’t have to worry about paying U.S. estate taxes, because taxes are assessed only if the asset value of the estate is more than $5,450,000 for estates of persons who died in 2016. Gift taxes are another matter. An individual can give a gift of money or property with a value of up to $14,000 per year to another individual. If the recipient is a U.S. citizen spouse, the amount of the gift is unlimited; however, if the spouse is a nonresident alien, the amount of the gift was limited to $148,000 for 2016. If gifts exceed the above amounts, a gift tax return must be filed.

Conversely, if you receive a gift or inheritance from a foreign person or estate, the IRS may want to know about it. A U.S. citizen or resident alien who receives a gift or inheritance of more than the foreign currency equivalent of $100,000 from a nonresident alien individual or estate, must reported that event to the IRS on Form 3520. This form is filed separately, and is not part of the tax return, but the due dates are the same. Stiff penalties apply for not reporting.