Financial Knack

Did your eccentric rich uncle leave you millions? If that uncle happens to be a non-resident alien, make sure you file the proper forms with the IRS.
Column by Richard Reed, CPA, TEP, M. Taxation | June 14, 2018 | Lifestyle

Key Biscayne is a tropical island paradise that has attracted people from all over the world. When a U.S. citizen, Green Card Holder or U.S. resident receives a foreign gift/bequest from abroad or a distribution from a foreign trust, it’s extremely important that the Annual Return To Report Transactions With Foreign Trusts & Receipt Of Certain Foreign Gifts (Form 3520) be filed properly and timely. This form must be filed if you receive gifts from a foreign person in excess of $100,000 from an individual and $10,000 if from a corporation. I find many people are under the misconception that the receipt of the gift is taxable. There is no tax due on the receipt of a gift from a foreign person! There is only a penalty of up to 25% of the gift if you do not report. If you receive a distribution from a trust, these are also reported on Form 3520. However, unlike a true “gift” a distribution may be taxable and is required to be reported no matter the amount.

› Richard Reed, CPA, TEP, M. Taxation, is a Tax Principal at Lancaster & Reed in Key Biscayne. For a consultation, call 305.361.1014, ext. 19, or visit

Inheritance Spending
Cars. Vacations. A bigger house. Ever wonder what the average American does with a substantial infusion of inherited cash? There’s a lot.

Shopping Spree
According to a recent study by Jay Zagorsky at Ohio State University’s Center For Human Resource Research, half of inherited wealth is spent (“the inheritance spree”), lost or donated. This is positive news for retailers, restaurant owners, remodelers, etc.



Investment Insight
After setting aside money for the tax man, general investments are the next most common use for inherited wealth. These include stocks & bonds, real estate, even simple bank accounts. Prepaying education is a popular choice by parents for monies left to young recipients.


Debt Reduction
Got a high interest rate on that second home, large student loans or credit card accumulation? Financial advisors for both the wealthy and credit-challenged counsel to maximize the amount of the inheritance by reducing the cost of borrowed money and future outlays.