Inheritance Tax Question?

Question

If my grandfather who is from Germany died and he left about 500,000 to my family, would we be taxed here in the us and Germany for the inheritance and also is their a way to open an account in a tax haven like Andorra or the Cayman islands or Switzerland to deposit the money without getting taxed and without getting into any legal trouble with the IRS or the FCTO

Answer 1

There is no federal inheritance tax. A few states still have them but in most cases they would not apply since he was not a resident though there are exceptions.



No idea on German taxes. Ask the executor, and ask if they can pay any German taxes from the proceeds from the estate before distributing any remaining assets.



There are reporting requirements, however, with severe penalties for failure to file or late filing. You will very likely need to file a Form 3520 informational return. If you have ownership or signatory authority over any foreign financial accounts, even if only momentarily to effect a wire transfer to your US bank account(s), you must file a TD F 90-22.1 report as well.



Forget going through tax havens for the transfer. Any income generated there is taxable in the US and passing through a tax haven just generates unnecessary questions. Have the executor of the estate do a direct wire transfer to your bank account. Ideally he or she should do direct transfers to each of the beneficiaries of his estate. That keeps everything neat and clean.

Answer 2

Certainly for the US, $500K is too low to get caught up with inheritance taxes. Given that he died in Germany, the local tax authorities know about the money and you cannot hide it. And listen to yourself, of course you could get into trouble if you try and hide the info.

Answer 3

Unless you live in one of the few states that has inheritance tax, you wouldn't be taxed.

Answer 4

your state may have an inheritance tax but there is none for Federal taxes