Willing An Estate to a Citizen of a Different Country

[Lestat84]

Disclaimer: I do not mean to sound greedy in saying what I am about to say.

I am almost set on my decision to leave the US, and become a citizen of some other country. my only small reservation is what happens when my parents die. If they were to will me part of their estate, would I be able to receive it if they are American citizens, and I am say a Japanese citizen? if so, what taxes would apply? If anyone has any knowledge of this law some advice would be greatly appreciated.

 

[Majestic]

The simple answer is, yes of course you can receive it.

The details of receiving it, and paying taxes on it, are much more complicated. In the US the deceased's assets are subject to estate tax. State taxes may also apply. Since the assets are in the US, the US accounting takes precedence over the Japanese accounting. However, once the accounting has been completed and any assets have been transferred to your ownership, you would then be liable for inheritance tax in Japan. There are a great many conditions that may apply to your situation which would alleviate (or eliminate) the tax burden in either jurisdiction.

This is the extremely short version of an extremely complex subject. Your citizenship is not as much of an issue as; a) where the assets of the estate are located, and b) your residence at the time of inheritance.

 

[Lestat84]

I see. Thank you for shedding some light on that. Would you mind elaborating on what I could do to relieve said tax burden should the situation arise?

 

[Majestic]

I think before you start fretting about tax minimization, the first thing to do is find out if the estate is even taxable. For this I leave you in the hands of the IRS, and their fairly easy-to-understand (a rarity!) explanation here

Estate Tax

For Japan, the inheritance tax kicks in on inheritances of about JPY 50,000,000. Or, to be more precise, there is a deduction allowed of 50,000,000 (plus 10,000,000 for each legal heir). So, given the above situation, I wouldn't lose too much sleep over this as long as your inheritance is within this threshold. If you stand to inherit more than 50,000,000 yen, you ought to get friendly with a tax expert.

For info on estate tax in the state where your parents live, I leave you in the hands of Google-sensei.

 

[johnnyG]

Yes, and one more detail to check on is whether that 50 million deduction applies to inheritances from abroad...! (I think it does, but I'm not the NTA.)

I don't know the rates/differences, but to my understanding, a US estate inherited by US-citizen children (even if they reside abroad) is taxed more favorably than a US estate inherited by a non-US person.



Lestat84--relieve your tax burden by keeping your US citizenship.