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Foreign inheritance from hidden company

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Lampman

Junior Member
My father passed away recently. He was a very secretive guy and kept gold in a foreign safety box which we have found and divided equally among myself and my siblings... no bank account was involved and the total is under the $2 million estate limit.

However, we also have evidence that he had a foreign holding company with cash deposits in an account. We are still trying to track this down and sort it all out, but he never filed any TD 90-22.1 forms with the Treasury Department.

It looks like there was a company formed offshore with a designated foreign attorney as the legal owner but my father as a beneficiary. He sent money over post-tax - he cashed in an IRA, paid the tax and wired the money overseas - we know this much - after that it gets murkey.

So it looks like the only things he did wrong are (1) not paying tax on gains, assuming there are any and (2) not filing the TD 90-22.1. I have his tax returns and a few other letters/forms which lead us to this conclusion.

How does this affect my siblings and myself? We don't know this stuff for a fact yet, but assuming we find what we expect to, it would be perhaps $500K for each of us and I'd like to just transfer it to my account here.

We have almost no documentation... Are we liable for the actions of our father? Note that he originally sent money overseas 10-20 years ago.
 
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tranquility

Senior Member
While *you* are not responsible for your father's actions, his assets are. The gold you distributed could be seized as one of his assets as proper distribution was not made and you don't truly "own" it. True, it is unlikely for the government to find out, but you never know. As to the foreign assets, that is very problematical as you may need to report things if you are now the owner. Then, it is not your father's actions but your own which you are liable for.
 

Lampman

Junior Member
PS: The Gold was not really part of his estate, but part of a trust and documented (which is how we knew about it). It seems though that there may well be a cash account somewhere based on the amount of gold and the amount he sent out of the country among other things.

So assuming I find an account and distribute all of it to myself and siblings... and we declare the income and pay the tax (if any). Is that all? Will I need to document where it all came from as that might well be difficult/impossible.

It would be in a foreign company account I think.
 
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tranquility

Senior Member
PS: The Gold was not really part of his estate, but part of a trust and documented (which is how we knew about it). It seems though that there may well be a cash account somewhere based on the amount of gold and the amount he sent out of the country among other things.
Only if the trust was irrevocable would it not be a part of the estate. A revocable trust's assets can be used to satisfy the debts of the trustor.

So assuming I find an account and distribute all of it to myself and siblings... and we declare the income and pay the tax (if any). Is that all? Will I need to document where it all came from as that might well be difficult/impossible.
the government frowns on money just showing up out of nowhere. There could be questions and that they are difficult to explain is not their concern. As to the taxes, no, you don't file a return. Dad's estate does.
 

Lampman

Junior Member
The gold was in an irrevocable trust (living trust which became irrevocable when he died). I understand both dad and the trust file a return now.. the trust for its stuff and dad for his small non-trust estate.

I am basing my theory on this....

20 years ago, dad sent X amount out of the country, and now we find Y amount of gold (and inventory it). based on the price of gold 20 years ago, there should be more gold than there is.

After seeing a few other documents and just knowing how my dad's thought process went, I am pretty sure we will find an account to which he is not the owner, but is a beneficial owner. And based on the wording of the trust, this would probably become a trust asset as well, but it gets murkey if he never reported it (though he did pay the tax when he cashed in his IRA).
 

tranquility

Senior Member
The gold was in an irrevocable trust (living trust which became irrevocable when he died).
From this description, the trust was a revocable trust and the gold could be used for the estate's debts.

I understand both dad and the trust file a return now.. the trust for its stuff and dad for his small non-trust estate.
Dad's estate will file a return for dad's last year. (Or, for the year up to his death and some later events.) The trust will not file a return unless the trust earns income once it became irrevocable and a separate entity and which is not distributed to the beneficiaries. There may or may not be an estate-tax return required--depending on the facts of the estate. There may or may not be a requirement for opening of probate, depending on the particular facts.

I am basing my theory on this....

20 years ago, dad sent X amount out of the country, and now we find Y amount of gold (and inventory it). based on the price of gold 20 years ago, there should be more gold than there is.
I have no idea what your theory is trying to prove. But, post hoc ergo propter hoc is a logical, and legal, fallacy.

After seeing a few other documents and just knowing how my dad's thought process went, I am pretty sure we will find an account to which he is not the owner, but is a beneficial owner. And based on the wording of the trust, this would probably become a trust asset as well, but it gets murkey if he never reported it (though he did pay the tax when he cashed in his IRA).
And, if wishes and buts were candy and nuts, we'd have Christmas all year! (My torts professor used to say this all the time. I'm not sure exactly what it means or if it makes sense, but he would use it in this situation. ) The holding of beneficial ownership of a trust *in* a trust can be very problematical. Clearly there will need to be legal research done once the facts are known.

People who are as secretive as you dad seems to have been almost always screw up. Not because they stupid, but because they try to be too clever and try to figure out new ways of doing things. While there are many who invent new ways, there are many highly-paid, intellegent, specifically-educated tax attorney's trying to do the same thing all day, every day. Once these teams of attornies invent something, the government's counter-team find a way to shut it down. All I'm saying by that is I suggest you get legal council. While you cannot be criminally liable for the acts of your father, you can be criminally liable for your own acts in furtherance. That's not to say anything is illegal, but it seems like there is some skating on the edge here.

If you came to my office with this story, we'd have to see some genuine evidence that nothing illegal had been going on before touching you as a client. Even then, it would be impossible to quote an estimate about how much we would charge. There is no way to guess the amount of research and work which will go into transferring the wealth to the beneficiaries from what you've said.
 

Lampman

Junior Member
I guess my ultimate question is if/when I discover an account that my dad had (via some company sturcture), what do I do about it?

The trust contained his US accounts, US house and gold which has all been distributed. It will have to pay some small tax on the interest it earned for the few months it had its own accounts (and it has an EIN number now). His trust and the small estate outside the trust was under $2million so for now I guess there is no issue.

But I just know I will uncover something else... dad never spent a dime so I know there just has to be more money overseas... I am guessing that it is in a company/nominee director/dad-as-beneficary structure (based on the type of stuff he read and documents he kept), but he could surprise me and have a bunch of land in Botswana for all I know.

I just don't want this to bite me years down the road. There are two issues here... I may not know the real amount of his estate if I can't find it, and some of his estate could be accounts with no Treasury report - not sure how that works if he has no signature authority but is a beneficial owner... I don't know much about this but now have his large collection of conspiracy books. :)
 
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tranquility

Senior Member
I guess my ultimate question is if/when I discover an account that my dad had (via some company sturcture), what do I do about it?
Take the information to an attorney.

His trust and the small estate outside the trust was under $2million so for now I guess there is no issue.
Make sure you are correct. If the foreign account puts you over the $2 million, the liability may be great and you may be left holding the bag.

The trust contained his US accounts, US house and gold which has all been distributed. It will have to pay some small tax on the interest it earned for the few months it had its own accounts (and it has an EIN number now).
The K-1 should account for the income to the beneficiaries. Why would the trust pay the tax at fiduciary rates?

But I just know I will uncover something else... dad never spent a dime so I know there just has to be more money overseas... I am guessing that it is in a company/nominee director/dad-as-beneficary structure (based on the type of stuff he read and documents he kept), but he could surprise me and have a bunch of land in Botswana for all I know.
You better do due dilligence to find it before estate tax deadlined come up.

I just don't want this to bite me years down the road.
Agreed.

I may not know the real amount of his estate if I can't find it, and some of his estate could be accounts with no Treasury report - not sure how that works if he has no signature authority but is a beneficial owner...
If you "can't find it", what are you supposed to do? Obviously, you want the stuff so you should try really hard to find it and pay the penalties in interest and taxes appropriately.

As to the quasi-legal nature of the potential accounts, how this will bubble out depends on the facts. You will not only be dealing with U.S. law, but foreign laws as well. I bet you will find it far better to get an experienced attorney then it will be to swim your way through the stream at trying to get the cash once found. If not, if you decide you can just get the money and distribute it at some future date, good luck. In this day of increased vigilence of international funding of terrorists, one unheralded triumph of the Bush Administration is the clamping down on foreign funds transfers. It is a true success story. It is unlikely you will get the funds without the U.S. government finding out. Make sure you handle things appropriately.
 

Lampman

Junior Member
Make sure you are correct. If the foreign account puts you over the $2 million, the liability may be great and you may be left holding the bag.
I have found the easy stuff - all his US accounts and the safety box/gold... but I am confident there is more. What do people do when they can't locate things? Already I have to look for land he may have owned in at least 3 countries (a long shot) and I can't just fly around the world looking through land records... I have a job too.

Perhaps it is best to just ignore it and let it fall into unclaimed status... except at some point someone may come looking for me because they can't contact my dad (and wouldn't know he has died).

I know that tax rate on stuff over $2mil is nearly 50% so if years down the road we find something, what happens? If the interest and penalties exceed what we found than it is better to not have looked for this in the first place.

What a mess.

You better do due dilligence to find it before estate tax deadlined come up.
How long is that? I have some records of his going back to the 70s and a mountain of business cards. There is no way I can sort through this in a few months... I did take 2 months off work to start, but we've only gotten through about half of it and have lots of "we need to look into that" type of things... e.g blueprints and land plots, checks, letters, business proposals etc.

You will not only be dealing with U.S. law, but foreign laws as well. I bet you will find it far better to get an experienced attorney then it will be to swim your way through the stream at trying to get the cash once found.
And how am I supposed to pay for a team of $300/hr attorney-types to go through 100 boxes of stuff to find a needle in a haystack... for potentially no results? I can sort through it over time, but it could be years.

Thanks for the feedback!
 
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tranquility

Senior Member
Estates are hard. We had one $8 million dollar one of a lawyer who committed suicide. He had his affairs in order and we spent a couple of months bringing together all the funds and property and bingo-bango, paid the tax, distributed the money and moved on.

We have a similar-sized estate now with a woman with an A/B trust and another trust, property in two states, safe-deposit boxes all over her state, disiniherited kids and a co-trustee/executor who is also a beneficiary. It has been a battle every step of the way. We couldn't even gather enough funds to fully pay the estate taxes when we filed for the extension. We are racing to finish by the deadlines and are about to go to court to protect the trust from those who think they deserve some of it. It is a full-time job when you look at all the people involved and suppose one person would do it. Even then, one could not learn the tax and legal ramifications within the time frame if they were not experienced.

The government does not care. They only want their money and reprots in the stautory time frame and will demand penalties and interest if that deadline is not met. If you intentionally don't meet it or hide thing intentionally, they will try to go criminally.

Being an executor/trustee can earn a person a lot of money. It is not free money.
 

Lampman

Junior Member
Perhaps it is better for me to stop looking then. The current known estate is under $2mil so there is no filing to be done as it's under the limit. It is stupid to go and pay a lawyer so they can earn "a lot of money" when nothing is ever found.

Certainly it is much easier for me to take all the boxes of decades old paperwork and just recycle it all. I don't need the hassle and aggravation of this any more and my siblings don't care either.

I am just curious what happens if money finds me later - I do not want to be criminally liable. I am not a lawyer and all of us just want to close this up and get on with our lives. I have wasted too much time already and have not been paid for the unpaid leave from work.
 

tranquility

Senior Member
Finding money later is not a criminal offense. You will need to report it appropriately and deal with the tax consequences. You must look for the money with due dilligence so other beneficaries cannot accuse you of breaching your fidicuary duties now.

If you later find the money, you must deal with it in a legal manner. There will be many calls from other beneficiaries and from the little voce in the back of your head that no one will find out about it and you should just distribute it appropriately. This is going to be *very* tempting. Don't do it! *That* will be a crime and I bet the government will find out about it.
 

Lampman

Junior Member
Of course. At least my siblings and I are all in agreement and during the division of assets from the house etc, there have been no disagreements.
 

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