Question on Inheritance and taxes

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akbh
Posts: 2
Joined: Mon Jun 13, 2016 1:16 pm

Question on Inheritance and taxes

Post by akbh »

My wife's mother passed away a few years ago and passed on some inheritance to my wife. So far the money (more than $100K) has been deposited in her sibling's name since then. Now we are planning to create an account in India for my wife and move the money from her sibling's name to my wife's name in an Indian bank account.

What are the tax implications for this in India and USA? We are NRI and US permanent residents.

any help is appreciated :)
Lakshya
Posts: 1184
Joined: Wed Jan 24, 2007 9:32 pm

Question on Inheritance and taxes

Post by Lakshya »

akbh;632757My wife's mother passed away a few years ago and passed on some inheritance to my wife. So far the money (more than $100K) has been deposited in her sibling's name since then. Now we are planning to create an account in India for my wife and move the money from her sibling's name to my wife's name in an Indian bank account.

What are the tax implications for this in India and USA? We are NRI and US permanent residents.

any help is appreciated :)


If you are planning to bring 100k to US then...

Money is deposited on sibling name only? Or you wife is joint account holder? Can you prove legally that 100k is inheritance? Can you provide a trail that say 200k was deposited form your wife?s mom acct to her 1 sibling acct? and now out of that 50% 100K is belong to daughter? Mother had a registered will?

You will need CA certificate to clear entire amount say 200k+, then deposit (67L)/50% in NRO/NRE and then wire back to US.?Bank will do this for you but they will ask for CA certificate & very likely will. (make sure pick NRI branch where they are aware of this type of transaction) US will not tax (if you proves it is inheritance) I think you have to inform them.

Above is a rough procedure.

For Inheritance you will not tax in India, as well as in US. But I am not sure how you can follow this procedure after few years of death. At this moment, if that money is in sibling acct then technically its belong to sibling which he/she will transfer to your wife, and that may treated as Gift Transaction. And US law may tax you for that.
kc2i
Posts: 16
Joined: Sat Jul 19, 2014 9:06 am

Question on Inheritance and taxes

Post by kc2i »

I have heard there is 35% tax/government cut if you inherit anything in the US from US parents. True?


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Desi
Posts: 11421
Joined: Tue Dec 19, 2006 9:12 pm

Question on Inheritance and taxes

Post by Desi »

Open an NRO account for your wife in India. Let her sibling give the 100K (or more) to your wife. Treat this as a gift from sibling. Gifts among blood relatives attract no taxes in India.

For USA, gifts from non US persons above certain limits have to be reported on IRS form 3520. There will be no taxes due in USA but you will be required to file this form.

Then you can start the process of money transfer from NRO to NRE and then transfer from NRE to USA. In the process of this transfer, you can talk to the bank or seek services of a CA or services of a forum Sponsor Rajesh Dhruva's firm.
akbh
Posts: 2
Joined: Mon Jun 13, 2016 1:16 pm

Question on Inheritance and taxes

Post by akbh »

Thanks all for the replies. To clarify, the account is in sibling's name only.

Re: form 3520 - I believe this is required only if amount is more than $100K/year? If amount is more than that, will my wife need to pay taxes in US? We can always do two transactions less than $100K each over two years to avoid that case.

If we open NRO account in my wife's name to receive the gift, what are the reporting requirements in USA? Standard foreign bank account reporting requirements?


Desi;632779Open an NRO account for your wife in India. Let her sibling give the 100K (or more) to your wife. Treat this as a gift from sibling. Gifts among blood relatives attract no taxes in India.

For USA, gifts from non US persons above certain limits have to be reported on IRS form 3520. There will be no taxes due in USA but you will be required to file this form.

Then you can start the process of money transfer from NRO to NRE and then transfer from NRE to USA. In the process of this transfer, you can talk to the bank or seek services of a CA or services of a forum Sponsor Rajesh Dhruva's firm.
Desi
Posts: 11421
Joined: Tue Dec 19, 2006 9:12 pm

Question on Inheritance and taxes

Post by Desi »

Create a GIFT LETTER (Title of one page document) as below (make two original copies, sign both and both siblings keep one copy in their files).

TO WHOM IT MAY CONCERN:

This letter confirms and acknowledges that the undersigned donor, Mr. Radheshyam Kanhaiyalal Mathurawala, a Resident Indian and an Indian Citizen, aged xx years, residing in India is making a financial gift in the amount of:

Rupees 101 Lakhs (Rs.101,00,000.00 ) to the recipient Radhika Devi Vrindavanwali.

We, the undersigned recipients and donors, hereby certify:
¨ the donor is a brother of the recipient, and
¨ that the said amount of money has been transferred from the donor’s Indian bank account with ICICI Bank (A/c #s nnnnnnnn ) to the Recipient’s bank account with Axis Bank, address (A/c # yyyyyyy) via cheque # xxxx (copy front and back attached), and
¨ the money is a genuine unconditional gift from the donor and does not ever have to be repaid, and
¨ that this monetary gift is absolutely without any conditions or expectations, and
¨ that this monetary gift is out of natural love and affection of Radheshyam Kanhaiyalal Mathurawala to Radhika Devi Vrindavanwali.

By the signature below, the recipient of the gift, Radhika Devi Vrindavanwali, accepts the gift and acknowledges the receipt of the same.

Donor:
[TABLE]
[TR]
[TD]Signature:[/TD]
[TD="colspan: 2"]______________________[/TD]
[TD][/TD]
[/TR]
[TR]
[TD]Print name:[/TD]
[TD="colspan: 2"]RADHESHYAM KANHAIYALAL MATHURAWALA[/TD]
[TD][/TD]
[/TR]
[TR]
[TD]Date:[/TD]
[TD="colspan: 2"][/TD]
[TD][/TD]
[/TR]
[TR]
[TD="colspan: 2"]Donor’s relationship to recipient:[/TD]
[TD]Brother[/TD]
[TD][/TD]
[/TR]
[TR]
[TD]Donor Address:[/TD]
[TD="colspan: 2"]333 Matkewali Galli
Kalicharan Haveli, Ramdevnagar[/TD]
[TD][/TD]
[/TR]
[/TABLE]

--

Recipient:
[TABLE]
[TR]
[TD]Signature:[/TD]
[TD="colspan: 2"]______________________[/TD]
[TD][/TD]
[/TR]
[TR]
[TD]Print name:[/TD]
[TD="colspan: 2"]RADHIKA DEVI VRINDAVANWALI[/TD]
[TD][/TD]
[/TR]
[TR]
[TD]Date:[/TD]
[TD="colspan: 2"][/TD]
[TD][/TD]
[/TR]
[TR]
[TD="colspan: 2"]Recipient's relationship to recipient:[/TD]
[TD]Sister[/TD]
[TD][/TD]
[/TR]
[TR]
[TD]Recipient Address:[/TD]
[TD="colspan: 2"]333 Parathewali Galli
Kalicharan Haveli, Ramdevnagar[/TD]
[TD][/TD]
[/TR]
[/TABLE]
Desi
Posts: 11421
Joined: Tue Dec 19, 2006 9:12 pm

Question on Inheritance and taxes

Post by Desi »

akbh;632786

Re: form 3520 - I believe this is required only if amount is more than $100K/year? [/quote] Limits on various items change from time to time due to inflation. So always check the form. Yes, currently I believe the it is required if gift is over $100K but check the form to make sure.

[QUOTE]If amount is more than that, will my wife need to pay taxes in US?
See my previous post.

[QUOTE]If we open NRO account in my wife's name to receive the gift, what are the reporting requirements in USA? Standard foreign bank account reporting requirements? FBAR and FATCA, plus you will have to open NRE account also.
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