Picture this: A loved one or acquaintance who lived in another country dies. You find out you now own the property in that country. It’s a dream come true, right? Inheriting property overseas can be an amazing gift. However, you should also be aware of procedural issues and potential challenges that could make claiming your inheritance somewhat frustrating.
First, you’ll need help understanding and navigating the legal system in the country where the property is located (which may be different from the country where your loved one lived and died.) Real estate is subject to the laws of the country where it is located. This usually means hiring a trusted legal advocate in that country to help with the paperwork and process.
Your legal advocate should also be able to help you understand if there are potential challenges to you being able to claim ownership of the property. In some countries, family members have a superior claim to outsiders’ claims. In other countries, only legal citizens may own property.
In addition to paying for foreign legal help, you should also expect and be prepared to pay administrative fees to the country and local jurisdiction to make the transfer, and you may owe real estate and foreign estate or inheritance taxes on the property in that country.
You may also need to report the inheritance to tax authorities in the United States. When an individual in the U.S. inherits property located somewhere else worth more than $100,000, there are IRS informational filing requirements (that threshold is just $16,000 if the property is owned by a corporation.) You might need to pay caretakers or workers at the property, especially if it’s an income-producing property, which means you’ll need a foreign bank account. That also comes with IRS reporting requirements.
Finding out that you are the beneficiary of property located overseas can be amazing. As you can see it’s also not without its challenges. If you find yourself in this situation, legal and tax professionals who understand these potential issues can help provide a smooth transition for you. Contact us today to learn more!