How to Inherit US Property When You (the Heir) Live Overseas

How to Inherit US Property When You (the Heir) Live Overseas

Inheriting someone’s home or property can be a stressful and overwhelming process. If the property is located in the US, and you happen to live outside of the country, it can be even more difficult.

I’ve worked on plenty of these cases, either as the professional executor or as the attorney for the executor. I’ve seen what works well and what doesn’t. In this post, I’ll walk you through some of the most common questions and concerns that come up when non-US heirs inherit property.

  1. If I live abroad, can I still inherit a house or property in the US?
  2. How do I claim my inherited property if I’m a non-US heir?
  3. What taxes will I have to pay on an inherited house?
  4. Can I be the executor and DIY my inheritance claim? What are the pitfalls?
  5. How can a professional help me inherit a US property?

First, let’s clear up the facts.

If I live abroad, can I still inherit a house or property in the US?

Yes, it’s allowed. Some countries actually don’t allow nonresidents to inherit property, which is why it’s worth mentioning here.

How do I claim my inherited property if I’m a non-US heir?

How do I claim my inherited property if I’m a non-US heir?

There are four basic steps to follow:

  1. Find an executor – preferably someone in the US.

An executor is someone who’s legally appointed to settle a deceased person’s final affairs. They’re tasked with handling all of the financial, legal, and other aspects of closing an estate.

Ideally, you’ll find an executor who’s in the US, because many state rules make it tough for people who aren’t from the US or aren’t currently living there to be executors. Rules aside, it’s nice to have an executor who’s located relatively close to the inherited property because that tends to make it easier for them to be on hand to deal with any problems that inevitably come up.

  1. Secure the inherited property and prep it for sale.

For most of the non-US clients I work with, their goal isn’t to keep the property, but to sell – and ultimately deliver the proceeds to the heirs. This involves a lengthy, multi-step process that I’ve covered in another post about how to sell a deceased person’s home.

  1. Confirm all debts and taxes are paid – and that you’re in the clear!

All heirs share one common goal: to close the deceased person’s estate with finality. Meaning, when the estate is finally settled, the heirs don’t want to have any personal or future liability for unpaid debts or taxes. They want their inheritance checks to be theirs, with no future risk. I’ve never met anyone who felt otherwise.

I’ll provide a quick rundown of the kinds of taxes you might be facing in just a moment.

  1. Close the estate and send the funds to the heirs.

When all the expenses and debts are settled, you’ll pay out the remaining money to the heirs, according to either the deceased’s will or state inheritance laws if there is no valid will.

What taxes will I have to pay on an inherited house?

First, let me say that nothing in this section (or this post) should be taken as advice. It’s pretty much impossible to give out specific advice on taxes or any other matter in a blog post because every person’s situation is different. For real guidance, talk to me or someone who is a professional like me.

Having said that, here are a few taxes to be aware of if you’ve inherited property.

  1. Income tax

Income tax is only a factor if the property generates income (for example, a rental home). You’ll need to make sure any applicable income taxes have been paid and you’ve filed the appropriate tax returns on behalf of the deceased.

  1. Capital gains

When you sell the property, you’ll want to make sure you don’t owe any tax on the profit. Most likely you won’t because of the stepped-up basis rule, but it’s still incumbent on the executor to ensure the tax filings are correct and confirm with the IRS that you’re in the clear. Because although unlikely, there are niche situations where you could owe capital gains tax.

  1. Estate tax

Estate taxes are taxes levied on the estate itself. Most estates don’t end up owing this type of tax, unless the person who passed away was ultra-wealthy. However, depending on the citizenship and residency of the deceased, there can be a significant estate tax. A professional will be able to advise on your specific situation.

Can I be the executor and DIY my inheritance claim? What are the pitfalls?

While it may be possible in some cases to handle everything on your own, many non-US heirs opt to find help once they learn more about the process. Here’s why.

  1. Many state laws prohibit it.

As mentioned above, most states require that the US executor be either a US citizen or a resident of the state where the property is located. If you don’t meet the state’s requirements, then the DIY path is likely not for you.

  1. Managing your inherited property is tougher when you live abroad.

For non-US heirs and executors, it can be very challenging to handle the transactions related to your property, for the plain simple reason that you’re not there.

For example, in New York specifically and in many other states, it’s required for property closings to take place in person. I’ve seen time and time again that when heirs and executors need to fly in and out, unexpected snags inevitably come up, not to mention the travel expense. Having an executor in the US can help save you the burden of time and money.

  1. You may not be as familiar with local markets.

Not knowing the nuances of a local neighborhood or market can make it a lot tricker to sell your property, or to just transact business in general.

Here’s a real-life example: I once had a non-US client who insisted on serving as estate executor himself, despite my advice that he find someone here. This person didn’t have a great understanding of how the US house-selling process works, and as a result didn’t always make the wisest decisions. He paid tens of thousands of dollars to have the home professionally staged with rented furniture and décor in preparation for sale. The staging ultimately had no effect on the selling price, so obviously it wasn’t worth it. My client was forced to explain this costly error to his fellow heirs, who of course wanted him to pay for the staging entirely on his own, which reduced his share of the proceeds from the home sale.

I know you’re smart and this wouldn’t happen to you. But all the same, it shows why working with someone who’s got deep experience preparing and selling inherited properties can pay off in the long run.

  1. Debts and taxes leave no room for error.

As noted earlier, pretty much every heir wants the deceased’s estate to be settled cleanly, with minimal tax burden and no liability to the heir. If I received an inheritance in a country I didn’t live in, and had to make sure I paid all necessary debts and taxes in that country, I wouldn’t be comfortable tackling it on my own. Instead, I would rely heavily on my local professionals to make sure everything was being done properly.

How can a professional help me inherit a US property?

If you’re an overseas heir, hiring a US-based professional like me to serve as executor will solve all the eligibility requirements. A professional will also have the experience and the know-how to navigate complicated legal and financial processes and avoid costly errors – so that you can collect your inheritance as quickly and as hassle-free as possible.

When you hire a professional executor, you also get someone on your side who has skin in the game. That’s because if executors don’t carry out their duties correctly, they can be held personally liable – meaning it’s much more likely they’re going to get the job done right.

And remember that no matter which route you go, the fees for an executor are the same whether you hire a professional or not.

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