When receiving money from overseas, there are a number of things you will need to take into consideration, especially if it’s inheritance money. Not only will you need to find an appropriate way to transfer the inheritance back to your local bank account without incurring hefty international transfer fees, but you’ll also need to be aware of what tax regulations apply when receiving an inheritance from abroad.
In this article, we’ll cover the best way to transfer an inheritance from overseas, tax regulations you need to be aware of (which vary depending on where you are located), and what paperwork you may need to file to avoid double taxation.
When transferring a larger sum of money from abroad – regardless of the reason – one of your main concerns will be finding a provider that can send your money internationally for a fair fee and exchange rate not too far from that which you would find on Google (i.e. the mid-market rate).
When looking to transfer your inheritance money back to your home country, here are a few things to factor into your decision:
Most banks and money transfer services will charge a fee for an international transfer. This could be a fixed fee, or it could be percentage-based depending on how much you are sending.
Banks especially are known for charging high fees for international transfers, both for the sender and for the recipient. That’s why our overall recommendation is to compare money transfer providers to find the best service for you.
If you are receiving a large inheritance from abroad (perhaps $10,000 or more), you may want to look for a specialist transfer broker who facilitates larger international transfers in particular.
In addition, another charge to take into consideration when finding the best way to receive inheritance money from overseas is the exchange rate. Often known as the hidden cost, banks and transfer providers will normally add a percentage-based markup on the mid-market exchange rate for international transfers.
Exceptions are transfer providers such as TransferWise and XE, who have a fixed fee structure in order to offer competitive exchange rates.
The markup added onto the exchange rate can vary from anywhere between 0.5 – 3% for money transfer providers, up to 5 – 6% for banks. For large sums in particular, it’s vital you compare providers and make sure you’re aware of the kind of margin you are being charged on top of the mid-market rate as this charge could amount to thousands being lost in fees.
Many banks and transfer providers have a maximum sending limit within a certain period of time (within 24 hours or a week, for example). You’ll want to make sure that you choose an operator that can send your inheritance money to you in one go, and that you also have all the documentation needed to prevent delays.
Most transfer providers and banks are fairly clear about their maximum sending limits, but you can also use our comparison engine to help you find a tailored list of money transfer operators able to handle sending your funds from abroad.
Banks are known for typically charging higher transfer fees and a larger markup on the exchange rate than most money transfer providers, with margins up to 5% added on to the mid-market rate. In the case of receiving an inheritance of, for example, $100,000 from overseas, that could amount to losing $5,000 simply on the exchange rate. Comparing providers and finding the most competitive fees and closest exchange rate to the mid-market rate is therefore a prudent strategy to avoid losing more of your money to charges than necessary.
An inheritance tax is paid by the person who inherits money, property, or other assets from a person who has died.
The amount that is taxable on an inheritance can vary depending on where you are in the world, so we’ve covered the main tax regulations when receiving an overseas inheritance in the UK, US, Canada, and Australia below.
In the UK, whether you need to pay tax on an inheritance from overseas largely depends on whether the individual can be considered domiciled out of the UK. HMRC will recognise a change of domicile when there is clear evidence that the individual in question moved away and planned to live abroad permanently.
A few examples of this could include:
You should note, however, that HMRC may still consider the UK to be the individual’s official place of residence for inheritance tax if they lived in the UK for 17 of the previous 20 years, or if they had a permanent residence in the UK at any point in the last three years of their life.
In the UK, you will not need to pay tax on inheritance if:
Find more information on the UK and inheritance tax from the gov.uk website.
In Canada, there is no inheritance tax. Therefore, whether you are receiving an inheritance from a relative who is not a resident of Canada overseas, or from a recognised Canadian citizen, your inheritance is not deemed as taxable income – rather, the estate pays all tax before you receive the inheritance.
With that said, you may be subject to taxation on any future income that may be generated from your overseas inheritance, even if it is not remitted back to Canada. This is because Canadian residents are subject to tax on worldwide income.
In the US, you will not typically be taxed if you are receiving an inheritance as a US person from a non-US person and the assets inherited are based outside of the US.
The three taxes that could come into play when receiving an inheritance from abroad are:
Gift tax is only applicable when the inheritance is received by a US national from a US national. Equally, estate tax does not apply provided the individual bequeathing the inheritance to you was not a US national or a foreign national residing in the US. If the estate is located abroad, estate tax will not apply. Rather, taxes are the responsibility of the foreign country in which the inheritance/estate is located.
However, even if your overseas inheritance is not taxable, you will likely still need to report it to remain transparent about your accounts. You will need to declare what you have been paid on your US tax return using Form 706-CE, which is Certification of Payment of Foreign Death Tax.
Completing this form will ensure the IRA knows that tax was paid on the inheritance you have received before it was transferred to you.
Find more information on US estate and gift taxes from the IRS website.
An overseas inheritance is not taxable in Australia. The only exception is if the executor of the individual’s estate advises that a part of it is, for example, if a part of the inheritance could continue to earn an income after the individual’s death.
An example of where this might apply is if your inheritance includes items that could earn an income such as interest on a savings account or dividends from stocks. If this applies to you, a tax return would be due on any income that is taxable from the estate until it has been administered in full.
Find out more about inheritance and tax obligations on the Australian government website.
Even if inheritance tax does not apply in the country you are residing in, it’s important to make sure you are aware of any legal obligations or responsibilities you need to uphold when receiving an inheritance from abroad.
Equally, you’ll want to make sure you are using a suitable broker or transfer provider when receiving your inheritance into your bank account. Verifying that the company in question can transfer the funds without hitting the maximum sending cap and that you are not losing vast amounts of money in fees are two essential considerations – our comparison engine will help you find a service suitable for your needs.
Elliott is a former investment banker with a 20 year career in the city of London.
During this time he held senior roles at ABN Amro, Societe Generale, Marex Financial and Natixis bank, specialising in commodity derivatives and options market-making.
During this time, Elliott’s client list included Goldman Sachs, JP Morgan, Credit Suisse, Schroders Asset Management, and the Pennsylvania State Public School Employees Retirement System, amongst others.
Yasmin Purnell is a Content Writer and Editor for MoneyTransfers.com. Having over 5 years’ experience writing across a range of industries including finance, insurance, and travel, Yasmin joined the team with a mission to make international money transfers and everything they encompass accessible to all.