Assets or Inheritance Abroad? Consider Specialist Services

When a Foreign National Dies With Assets in the U.S., What Happens? |  Wealth Management

Losing a loved one is a profoundly sad experience, made even more challenging in today’s world as many of us live abroad in search of better opportunities.

Despite the distance, the pride parents feel for their children remains strong. When they pass away, they often leave inheritances for their children. In the midst of grief, many people transfer inherited cash and end up losing a significant portion in the process.

Unless you’re financially savvy, repatriating funds can result in substantial losses. Below, we highlight the pitfalls of international money transfers and offer tips on how to minimize these losses.

Many of Us Have Family Overseas

With each generation, more people are willing to move abroad for better opportunities. According to a 2013 UN study, 232 million people, or 3.2% of the world’s population, lived outside their birth country. This marks a 33.6% increase from 1990, when 154 million people lived abroad.

Even Americans, traditionally more homebound (only 35% would consider moving overseas), are increasingly adopting the expat lifestyle. In 2016, about 2.8% of the population, or nine million people, lived abroad, according to State Department estimates.

This trend is likely to continue. A Boston Consulting Group survey found that 59% of Millennials would consider working overseas. As international employment rises, more people will leave assets behind in their home countries, such as retirement accounts and real estate, which they will eventually need to access from abroad.

Additionally, inheritances will continue to be an issue as loved ones pass away. Many do not anticipate the complexities involved in repatriating bequeathed funds, especially given that the American estate tax doesn’t apply unless the inheritance exceeds $11.2 million. However, those unfamiliar with international law and cash transfer processes can encounter significant challenges.

What Problems Can Occur When Repatriating an Inheritance?

Grief can cloud judgment, leading many to overlook the tax implications of foreign inheritances. Various countries impose levies on estates, and your home country may also tax repatriated funds.

For example, European inheritance laws vary significantly. Denmark taxes children 15% on inherited estates, while Germany taxes amounts above €500,000 between 7-50%. Italy offers a more favorable regime, exempting the first €1,000,000 from inheritance tax.

At home, your government might view repatriated funds as taxable income. For instance, Canada generally treats funds from non-resident estates as non-taxable. However, if your relative is considered a Canadian tax resident, you could face taxes. If your mother raised you in Canada but retired abroad, she might still be considered a tax resident, triggering Canadian tax liabilities.

Avoiding double taxation through bilateral tax treaties can be complex, and many beneficiaries make costly mistakes when transferring inheritances.

Beware the Pitfalls of Moving Money Without Professional Guidance

Understanding inheritance laws is essential, but it’s also crucial to adhere to cash transfer regulations. For instance, sending more than €5,000 to Canada from Finland could result in a gift tax of 8-33%. To avoid this, you could send the money in smaller increments. However, doing this through a traditional bank can be costly due to high fees and unfavorable exchange rates.

Who Can Help Me Save Money on International Cash Transfers?

The internet has revolutionized money transfers, allowing new companies to offer low or no fees and competitive exchange rates. For example, transferring £50,000 through World First instead of Barclays can save you over 5,000 AUD. Transferwise offers similarly competitive rates, providing significant savings compared to traditional banks.

Keep Banks and Governments from Taking a Large Cut of Your Inheritance

Most people leaving inheritances are not deca-billionaires but hard-working individuals who want their children to be well taken care of. To maximize what you keep when moving inheritances across borders, stay vigilant and consider using specialist services for international transfers.

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