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Q: New Zealand inheritance in USD after taxes ( Answered 5 out of 5 stars,   2 Comments )
Subject: New Zealand inheritance in USD after taxes
Category: Business and Money > Accounting
Asked by: rochelle_ann-ga
List Price: $75.00
Posted: 23 Jun 2006 11:00 PDT
Expires: 23 Jul 2006 11:00 PDT
Question ID: 740556
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

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!
Subject: Re: New Zealand inheritance in USD after taxes
Answered By: sublime1-ga on 23 Jun 2006 13:23 PDT
Rated:5 out of 5 stars

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:

This page from 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."

Finally, as for New Zealand, this article from The Telegraph

"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."

As for conversion, based on the rates today, as calculated on the website:

62000 New Zealand Dollar(s) = 37751.7 American Dollar(s)
1 USD = 1.64231 NZD
1 NZD = 0.608898 USD

A general article, from the same site, on currency conversion while
travelling, may be of some value to you:

I hope that makes your day!


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"

"inheritance OR estate tax" "new zealand"

"inheritance tax" alaska

Request for Answer Clarification by rochelle_ann-ga on 23 Jun 2006 23:32 PDT
Thanks for the info! This is great news, however I'm still needing a
little more 'proof' that this is the case. Some of the evidence you
provided to support no taxes on inheritance are not from exactly
'reputable' sources, and some are outdated.  If they are still current
and true, then this is great news.  I don't feel though, that my main
concerns have been answered, namely:

1. I'm a US resident, but my inheritance is overseas. This is not a
straightforward case (as in the links you referred me to) of a US
citizen receiving inheritance from a US estate.  My inheritance will
be coming from abroad (New Zealand), to me, in the US.
2.  The info you provided on inheritance tax in NZ was an article
written 2 years ago in a British tabloid - I would prefer some more
'concrete' information. As we all know, the press is not always
accurate - and the paragraph you refer to is not referencing any
specific New Zealand tax law. Again, if it's accurate and true, then
this is great.
3.  If the references you provided all ring true, and I do not have to
pay any federal OR state tax on my inheritance, does this mean that I
get to keep the full amount? or do I have to claim it as income on my
next tax return where I'll get heavily taxed anyway?

Thanks for your help in answering this, and I look forward to hearing
from you further!

Clarification of Answer by sublime1-ga on 24 Jun 2006 15:01 PDT

As I noted there are innumerable other results from the Google searches
I linked to which confirm the validity of the information I provided.

Here's one from the New Zealand Government's Department of Immigration

"If you are purchasing property and you come from a larger US city,
 you will find that your housing dollar goes a lot further in New
 Zealand, even with the rising New Zealand dollar.

 When trying to compare cost of living, some things to remember are:
 [...]there is no inheritance tax."

Here's another, from the Amberland website for professional property

"And finally in terms of taxation advantages, there is no inheritance
 or estate tax in New Zealand making the purchase and ownership of
 property attractive to retirees, expatriates, second homers and of
 course, property investors."

I'm fully aware that you're a US citizen, living in Alaska, and
receiving an inheritance from NZ. That's why I verified that NZ
will not be taxing the estate or the inheritance, nor will the US,
since the inheritance is less than the amount which qualifies for
taxation, no matter where it's being received from. And Alaska 
also has no inheritance tax. This is further supported by this 
page from the Alaska Legal Resource Center resource on the Touchngo
website, which documents the Alaska Statutes:

"Chapter 30. Inheritance and Transfer Taxes

 [Repealed, Sec. 1 ch 242 SLA 1970]."

And, as the answer linked in the comment by myoarin-ga notes, about
reporting "other income" on line 21 of form 1040: 

"TIP:  On Line 21, Other Income, do not report any non-taxable amounts
 such as child support, money or property that was inherited, willed to
 you or received as a gift or life insurance proceeds received because
 of a person?s death."

That's from the 2005 1040 form, but, as I noted earlier, this law has
not changed. In the year that I received my inheritance, I did not 
report the amount at all on my income taxes.

I hope that puts you further at ease...time to celebrate!

rochelle_ann-ga rated this answer:5 out of 5 stars and gave an additional tip of: $5.00
Brilliant - thank you so much for your thorough answer. It definitely
has put me at ease, and I can't believe that I will not have to pay
ANY tax! This is such great news, so thank you, thank you, thank you!

Subject: Re: New Zealand inheritance in USD after taxes
From: myoarin-ga on 24 Jun 2006 03:25 PDT
Perhaps the answer to this similar question will help.  See the
clarification at the end of the answer:
Subject: Re: New Zealand inheritance in USD after taxes
From: sublime1-ga on 27 Jun 2006 11:34 PDT

Thanks very much for the 5 stars and the tip!


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