How to avoid losing most of my inheritance to Uncle Sam?

February 26, 2008 10:00 AM

How do I get money (30,000 Euro/$50,000) from Europe to the United States with the least amount of pain?

My mother used some money from my grandmother (to be a sort of inheritance for me) to buy a house in France, and she has now sold the house, and wants to give the money to me to do with as I please. We are trying to figure out the best way to get this money to me from Europe without giving most of it to Uncle Sam. It seems like she can gift $12,000USD to me each year without any tax implications for her, but will I get taxed on that? And is there anyway of doing the whole amount in one fell swoop without losing most of the money to taxes?

I have gone through previous questions, and I do not want advice on what to do with the money, as that has been answered many times, I am just looking for some help, ideas, info on how to get the money into the country. Should I be talking to a financial planner, lawyer, or accountant on how to accomplish this, or should I just try to get the money over here without any counsel, and just figure out the tax implications on my own?

posted by Grither to work & money (22 comments total)

Should I be talking to a financial planner, lawyer, or accountant on how to accomplish this

If you want to do it legally and with a minimum of trouble from the IRS, I think so. That's a lot of money, and any CPA or financial planner should be able to help you figure out how to move it legally, with the least amount of loss. The price for their services will probably be only a few hundred dollars at most; a tiny fraction of the total windfall.

IMHO, considering the large amount of money involved, you should not even think about doing this on your own. If you do it wrong and get caught, you could possibly lose all of the money. Compared to that (or to the hassle of being audited by the IRS), the cost and trouble for a CPA or financial planner is negligible. They might also have some clever ideas that would allow you to come out ahead, even after taxes, by investing some or all of the money.
posted by vorfeed at 10:20 AM on February 26

And....is there any reason why I shouldn't just fly over, take it all out in cash (euro or dollar) and fly back with it, and declare it on the customs form?
posted by Grither at 10:20 AM on February 26

Yeah, I'm not looking to do anything illegal vorfeed, but I am just wondering if it's simpler than I am making it out to be, or if it will be a nightmare in taxes, customs forms, and IRS audits if I do something that seems like it makes sense, but really isn't. Like a check for the whole amount that I deposit in my savings account. It might take a while to clear, but will that be taxed heavily?

I'm getting closer and closer to hiring a professional on this one, but I thought I'd ask here first to see if there's something I'm missing.
posted by Grither at 10:23 AM on February 26

And....is there any reason why I shouldn't just fly over, take it all out in cash (euro or dollar) and fly back with it, and declare it on the customs form?

because there's a cap. it's 10K, I seem to remember.
posted by matteo at 10:34 AM on February 26

matteo, I was under the impression that 10k is the amount beyond which you must report it. Any amount of cash less than 10k doesn't need to be put on your customs declaration form at all.
posted by Grither at 10:38 AM on February 26

If you are saying that your grandmother can give you up to 12k a year without tax consequence, I'm assuming she is a US citizen, because that sounds a lot like the current gift tax rules. If she is in fact a citizen of the US, then that limit is non-negotiable. There are methods to convey control of the money to you using trusts. If you go down that road, you definitely need professional help.

When you declare more than 10k in currency at the borders, you will usually get asked a lot of questions about it. If you say that it was a gift from your grandmother, they may well forward that information to the IRS -- I have no idea. I do know that one of my poker playing buddies had 70k confiscated because they didn't believe his poker player explanation and it took him almost three months to prove he earned it legally and get the money back.
posted by Lame_username at 10:42 AM on February 26

Oh yeah, just so you know, checks do not require filling out the FinCen 105 form, just currency and equivalents.
posted by Lame_username at 10:46 AM on February 26

Any amount of cash less than 10k doesn't need to be put on your customs declaration form at all

OK but five roundtrip plane tickets to carry 9,999 dollars with you each time will set you back about 3,000 bucks, it's a bad idea.

also, keep in mind that it is nice bunch of money but it's not like you're trying to bring over a gazillion euros. talk (you or your mom) to a professional in the banking system, it's what they do.
posted by matteo at 10:48 AM on February 26

matteo: OK but five roundtrip plane tickets to carry 9,999 dollars with you each time will set you back about 3,000 bucks, it's a bad idea.

Right, I guess what I meant to ask was will the customs people notify the IRS of the cash that I am bringing in if I declare it? Also, happy 7 year anniversary on Mefi!

Lame_username, so if I do the transfer just by having my mom write me out a check, then I will just have to deal with the tax on it? Any idea how much that tax would be?
posted by Grither at 10:58 AM on February 26

OK but five roundtrip plane tickets to carry 9,999 dollars with you each time will set you back about 3,000 bucks, it's a bad idea.

It is also a crime to structure transactions to avoid reporting requirements which carries quite stiff penalties.
posted by Lame_username at 11:01 AM on February 26 [1 favorite]

Y'all are overthinking this.

If the question is about tax consequences, $50k is above the annual gift-tax exemption of $12k (although if you have a spouse you can effectively make it $24k per year). It's still well under the lifetime exemption. So unless the questioner expects his mother's estate to be more than $1 million from his mother, the tax consequences are not likely to matter. There are forms to fill out but it's not likely to result in you (or your mother) paying Uncle Sam (unless you expect your mother's estate to be in excess of $1 million).

If the question is asking about logistics of getting money from Europe to the US, reputable financial institutions do this all the time. You may pay currency conversion charges and a small wire transfer / SWIFT payment fee. Shop around but it should be less than the cost of a round-trip ticket.

IAAL but IANYL.
posted by QuantumMeruit at 11:23 AM on February 26

You need to do a simple wire/bank transfer from one account to another.

If taxes are a concern then read about one-time-gifts here.
posted by damn dirty ape at 11:37 AM on February 26

After preview, excuse me on being inaccurate in my previous post. That's what I get for shooting from the hip while eating lunch.

The lifetime gift tax exclusion is $1 million. Does your mother anticipate giving in excess of $1 million to individuals in her entire lifetime? For annual amounts over $12,000, she must file a gift tax return, and the amount over $12,000 reduces the funds she can pass through her estate free of the estate tax. I don't believe there are any immediate tax consequences, though.

Currently, the estate tax exemption limit is $2 million for 2008 and $3.5 million for 2009, and is repealed in 2010. Who knows what Congress will do after that; if they do nothing, the exemption falls to $675,000 in 2011.

I'm familiar with the application of this stuff to US residents, and I don't believe that the fact that the funds are currently in Europe changes the gift/estate tax consequences (assuming your mother is a US citizen).
posted by QuantumMeruit at 11:41 AM on February 26

QuantumMeruit: If the question is about tax consequences, $50k is above the annual gift-tax exemption of $12k (although if you have a spouse you can effectively make it $24k per year). It's still well under the lifetime exemption. So unless the questioner expects his mother's estate to be more than $1 million from his mother, the tax consequences are not likely to matter. There are forms to fill out but it's not likely to result in you (or your mother) paying Uncle Sam (unless you expect your mother's estate to be in excess of $1 million).

The amount is only going to be about $60k max, I believe. I'm not sure how long she wants to keep an account open in Europe though, as she lives in the States now and no longer owns a house over in Europe. Do you have any idea how much I would have to pay in tax if we just arranged the transfer of the full amount in one go in one year?
posted by Grither at 11:42 AM on February 26

You need to do a simple wire/bank transfer from one account to another.

If taxes are a concern then read about one-time-gifts here.
posted by damn dirty ape

Beautiful, thanks for the link!

For anyone wondering, it seems that since my mother won't be planning on handing out over $1mil during her entire lifetime, she can claim this against that one million max amount and not have to pay a gift tax on it. And it also looks like I won't have to pay income tax on the gifted money, either.

Now I just need to figure out which place is best to do the transfers!
posted by Grither at 11:47 AM on February 26

happy 7 year anniversary on Mefi!

oh jesus christ it's true. thank you, I guess
posted by matteo at 11:55 AM on February 26

Hm....so I just thought of something else.....
My grandmother lives in Sweden, and the money is from Sweden. I don't think my mom ever brought the money into the states, and thus hasn't paid taxes on it I believe. Is this going to be a problem if she wires it to my account in the states? Will she have to pay tax on the money she wires in?
posted by Grither at 12:29 PM on February 26

One possibility that nobody mentioned: put it in a bank in Sweden, and transfer it over via wire transfer in smaller amounts as needed.
posted by dbarefoot at 1:36 PM on February 26

Generally, in the US, you don't pay taxes when you receive gifts. Looks like it's the same in France. My 30-second Google-fu fails at finding information on Sweden, but with the funds in France being transferred to the US, how would the Swedish taxing authorities even find out?

Did your mother realize any profit on the sale of the house in France? There may be French capital gains taxes due -- this article came up in a quick Google search. Hopefully the people who assisted her in selling the house advised her on that.

I really think you're over-thinking this. Reputable international financial institutions handle this stuff All The Time and talking these sort of issues through with you should be part and parcel of what you get when you deposit your funds there.
posted by QuantumMeruit at 2:57 PM on February 26

I would be that it would cost, at max, maybe $300 to talk to an accountant about this, and the advice would set your wandering mind at ease.
posted by megatherium at 5:09 PM on February 26

You need to find yourself an international tax accountant. S/he can answer all of your questions for you.

You should know that there is the risk of double taxation if it is done wrong. You will get some of the taxes back on your 1116 (for foreign tax credits) which is filed with your 1040. Also, check out the Income Tax Treaty with France.
posted by thetenthstory at 6:59 PM on February 26

It looks like my best bet is to find a professional to talk to about this, thanks very much all for your help!
posted by Grither at 6:24 AM on February 27