Most people are aware of the estate and gift taxes, but is an inheritance tax on the way? Proposals under IRC § 2801 may require certain donees to pay a 40% inheritance tax. More specifically, if a U.S. domiciliary receives a bequest from a foreign trust—unless an exception applies—it is presumed that the beneficiary is subject to a tax under the proposed rule. The two exceptions to this tax are when a bequest was included in a filed U.S. estate or gift tax return and the tax due was paid, and when the bequest is to a spouse for which a marital deduction applies. In order to prove that the transfer was not a covered bequest, you must reasonably find that the transferor was not a covered expatriate. Over the long run, legislative action is required to make the tax workable, and Congress should require the Treasury to maintain a list of covered expatriates.
See Stephen Liss & Marianne R. Kayan, Inheritance Taxes Return to U.S. Soil, Wealth Management, November 9, 2016.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
