Does one pay taxes on an inheritance from overseas?

New Zealand inheritance in USD after taxes

• Yesterday I received a letter from my recently deceased grandmother's lawyers in New Zealand stating that I was one of eight named beneficiaries on her will. Items on her will were laid out, including the following: House - market value: $900,000 Stocks & Shares: $100,000 Car - insured value: $18,999 Contents of house (valued by real estate agent): $24,000 Savings: $15,000 The total of her assets came to $1.1million. Even though I am one of eight named beneficiaries, the estate is to be divided into 7 parts, and my brother and I are to share the 8th part (the money went to my grandmothers children, but our father is deceased therefore his share was split between my brother and I). I think this comes to approx. $62,000 NZD or $38,000 USD I am a NZ citizen, however am married to an American and have been living in the USA since 2004. Alaska, USA is now my permanent residence. My questions are: How much tax can I expect to pay on this inheritance? Will I have to pay tax in both countries - the USA and New Zealand? Will I have to pay both federal and state tax in the USA? Is there any way I can get away with not paying any tax by keeping my money offshore in NZ? I don't want to see my Grandmother's inheritance fizzled away by taxes, currency conversion and the likes. Any light you can shed on this would be appreciated! Rochelle_ann

• Answer:

  rochelle_ann... Happily, your inheritance won't be subject to any taxes. I took this question because of personal experience with a similar situation. Some years ago, I inherited $40,000 USD, and one of my first questions to the lawyer was how much the estate tax might be. None, I was told. This article from Wikipedia explains the current US law, and outlines the exemptions which are applied to the gross value of the estate, showing, in the table under the section titled, 'Exemptions and tax rates', that the 2006 tax credit is two million dollars. Estates that have a lesser value than this are not subject to inheritance tax. As for state taxes, they note: "Many U.S. states also impose their own estate or inheritance taxes (see Ohio estate tax for an example). Some states "piggyback" on the federal estate tax law in regard to estates subject to tax (i.e., if the estate is exempt from federal taxation, it is also exempt from state taxation). Some states' estate taxes, however, operate independently of federal law, so it is possible for an estate to be subject to state tax while exempt from federal tax." More on the page: http://en.wikipedia.org/wiki/Inheritance_tax This page from RetirementLiving.com notes the various taxes imposed by all 50 states. As for Alaska, it says: "There is no inheritance tax and the estate tax is limited to federal estate tax collection." http://www.retirementliving.com/RLstate1.html Finally, as for New Zealand, this article from The Telegraph notes: "Britain now has one of the most punitive inheritance tax regimes in the world. Australia, New Zealand and Canada abolished theirs years ago and in America there are plans to phase out all federal estate duties by 2010 [as can be seen in the Wikipedia table I referred you to previously], although individual states levy their own taxes." http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2004/09/24/ntory24.xml As for conversion, based on the rates today, as calculated on the gocurrency.com website: 62000 New Zealand Dollar(s) = 37751.7 American Dollar(s) 1 USD = 1.64231 NZD 1 NZD = 0.608898 USD http://www.gocurrency.com/cgi-bin/fxcmcalc?value=62%2C000&base=NZD&target=USD&x=47&y=13 A general article, from the same site, on currency conversion while travelling, may be of some value to you: http://www.gocurrency.com/travelers-tips.htm I hope that makes your day! sublime1-ga Additional information may be found from further exploration of the links provided above, as well as those resulting from the Google searches outlined below. Searches done, via Google: "inheritance tax" ://www.google.com/search?q=%22inheritance+tax%22 "inheritance OR estate tax" "new zealand" ://www.google.com/search?q=%22inheritance+OR+estate+tax%22+%22new+zealand%22 "inheritance tax" alaska ://www.google.com/search?q=%22inheritance+tax%22+alaska