Inheritance While Living Abroad: Taxes, Transfers & What to Expect

You’re living abroad when unexpected news arrives: a loved one back home has passed away and named you in their will. Amid the grief, you now face a complex process of managing inheritance as an expat—navigating inheritance laws, cross-border transfers, and potential tax implications in more than one country. If this sounds familiar, you’re not alone.

Many expats are surprised to learn how different the rules can be from one country to another, even for something as universal as inheritance. What seems straightforward in your home country may require extra paperwork, tax disclosures, and legal help where you live now.

This quick guide will lay out what to expect—and how to stay on the right side of tax and reporting rules when receiving an inheritance as an expat.

Can You Receive an Inheritance as an Expat?

Yes, you can. Most countries, including the US, allow citizens and residents to receive inheritances from anywhere in the world. Whether it’s cash, property, or shares, you have a legal right to claim what’s been left for you.

If the inheritance is from a US estate and you’re living abroad, your citizenship doesn’t change your eligibility. Likewise, if you’re a US citizen receiving an inheritance from a foreign estate, you can still claim it.

What gets tricky is how and where it’s taxed—and how you need to report it. Because the US taxes based on citizenship rather than residency, you’ll always be subject to US tax rules on your inheritance. At the same time, you may be subject to taxation in the country where you reside.

US Tax on Inheritance as an Expat

Individual Inheritance & Income Tax

If you are a US citizen or green card holder and you receive an inheritance as an expat—whether it’s cash, property, or investments—you usually don’t owe any federal income tax on the amount you inherit. That means you don’t need to report the inheritance itself on your tax return. However, what you do with that inheritance can create taxable events. For example, if the assets you inherit generate income—like interest from a savings account, dividends from stocks, or rent from a property—that income must be reported and taxed just like any other.

Retirement Accounts

Retirement accounts are treated a bit differently. If you inherit a traditional IRA or 401(k), you’ll likely need to pay income tax on any distributions you take. These accounts were funded with pre-tax dollars, so the IRS taxes the money when it’s withdrawn—even if you weren’t the original contributor. In contrast, if you inherit a Roth IRA, the withdrawals are usually tax-free—provided you meet certain conditions.

Estate Tax

While the IRS doesn’t have an inheritance tax, a 40% federal estate tax applies if the taxable estate plus lifetime taxable gifts exceed $13,990,000 (2025). This tax is applied to the estate, not the individual beneficiary.

State Tax

In addition, a handful of US states charge beneficiaries an inheritance tax. These include Pennsylvania, New York, Illinois, Kentucky, Maryland, and the District of Columbia. If the deceased lived in one of these states, you may owe state-level inheritance tax, even if you live abroad.

Most estate and inheritance taxes are progressive, with higher-value estates taxed at higher rates. Hawaii and Washington have the top estate tax rate at 20%, applying to estates of over $15.49 million and $9 million. Most states cap their rates at 16% (2024).

Some states offer partial or full exemptions based on your relationship to the deceased. For example, spouses can be exempt, and children may receive reduced rates or higher thresholds. These relationship-based exemptions vary widely, so it’s essential to check the rules in the deceased’s state before assuming a tax exemption applies.

States update their laws frequently, and some (like Connecticut) are actively reforming or phasing out their estate taxes altogether. You can verify current rates with the state’s department of revenue, or with a qualified estate planning attorney.

Read More: Forbes States with Inheritances or Estate Taxes

Foreign Tax on US Inheritance as an Expat

If you live abroad and receive an inheritance from the US, you may face foreign tax obligations in your country of residence. Some countries treat foreign inheritances as taxable income, while others exempt them entirely. For example, Spain, France and the UK often tax worldwide inheritances, including those from the US. Similar to the US, many countries don’t tax the inheritance itself but may tax future income generated by it. Some countries apply progressive tax rates depending on your relationship to the deceased.

Fortunately, the US has tax treaties with several countries that help minimize double taxation. You should consult a cross-border tax advisor to understand your exact obligations.

You may also have to report the inheritance to local tax authorities, even if no tax is due. Penalties for failing to do so can be steep, so it’s vital to check local rules.

US Reporting Requirements

Even when no tax is owed, you may still need to report your inheritance.

• As there is no federal inheritance tax, there’s no IRS reporting requirement to declare the inheritance as an individual. The only exception is if you get over $100,000 from a non US Citizen, then this must be declared on Form 3520, otherwise you will face a potential $10,000 filing penalty.
• The estate may need to file estate tax return (IRS Form 706) if the gross estate exceeds the reporting threshold. This is due nine months after the date of death. A six-month extension is available if requested prior to the due date and the estimated correct amount of tax is paid before the due date. Executors may also need to report inherited property values on Form 8971.
• Income generated from inheritance is reported to the IRS as you would other personal income. For example, income from dividends and interest is reported on your federal tax return (Form 1040) and capital gains from the sale of inherited property are reported on Schedule D. If you inherit an IRA or pension, you may get a 1099-R with the Distribution Code 4, which also needs to be reported and taxed on Form 1040.
• State inheritance or estate tax filing may be required depending on the deceased’s state of residence; check your US state’s Department of Revenue or Taxation for current rules.
• Inheritances held in foreign accounts may trigger US FBAR or FATCA reporting requirements.

Receiving an Inheritance as an Expat

Once an estate is settled, the executor or lawyer will usually contact you to arrange the transfer. That might involve a direct bank transfer, a check mailed internationally, or assigning ownership of property or shares (which may require a local notary or legal process in the country where you live).

If the inheritance is in another currency, check for potential fees or delays from your receiving bank. Some countries limit incoming transfers without proper documentation, so notify your bank ahead of time to avoid blocks or freezes.

Pro Tips to Stay Compliant

Navigating the logistics of receiving an inheritance from abroad isn’t just about tax forms. It’s about recording and documenting, staying compliant, and avoiding unnecessary penalties. The more prepared you are, the smoother the process will be.

• Document everything: Keep copies of the will, probate documents, executor letters, IRS forms (like Form 706 or Form 8971), and proof of funds received. For local filings, request notarized copies, and get certified translations if the originals are in another language. Some countries require this for reporting or legal recognition.
• Use international banks: Choose a bank that handles large cross-border transfers and understands how to document the source of funds. Ask whether they can flag inbound inheritance payments to avoid delays or suspicion under anti-money laundering laws.
• Request a Certificate of Tax Residency: If you’re trying to claim tax relief or avoid double taxation under a treaty, a Certificate of Tax Residency (from the IRS or local authority) can help. This proves where you’re tax resident, which can be essential for accessing treaty benefits.

Final Thoughts

Receiving an inheritance as an expat can be emotionally and administratively complex. You may face reporting obligations in both the US and your new country, and taxes may apply depending on local law and your relationship to the deceased. Start early, organize your paperwork, and get expert help where needed.

Once the logistics are sorted, it’s worth asking: how can this gift serve your future?

MyExpatInvest can connect you with a financial advisor who specialize in helping expats invest inherited wealth wisely, across borders and currencies. When you’re ready, we’ll help you put your inheritance to work—growing it with intention and care.

Even while you are dealing with your inheritance, your US tax responsibilities remain. MyExpatTaxes can simplify the process with e-filing in under 30 minutes. Once your US taxes are taken care of, that’s one less thing to think about.