I've been reading entries but haven't yet seen my particular question. My parents (both US citizens living in the US) received a large inheritance in Europe when my foreign grandmother (never a US citizen) died in 1978. They paid European inheritance taxes, then opened a foreign bank account and never touched the money, except to open two small personal accounts (about $50K each), one in my name & one in my sister's (we are both US citizens living in the US too). Their account has grown to close to two million Euros, and they are both 90 years old. They would like to gift us their foreign money before their death, by splitting it equally between the 2 of us, and transferring it into our European accounts. The European bank has already instructed us how to proceed, and the transfer is imminent.
As the money will be a gift, do my sister and I need to declare it? Should we transfer it into a US bank, or is it better to leave it where it is? Are there laws regulating how much & how often we can make transfers into our US bank accounts, or penalties, taxes, fees? Finally, I know I should contact a professional about this ASAP, but should it be an international tax accountant or lawyer? Thanks so much for your help.

1. Your parents received inheritances, and never transferred funds to the U.S. There is no federal inheritance tax in the U.S.
Your parents have foreign bank accounts, so they were required to file Form FBAR. Any interest income must be reported on the U.S. tax return. Your U.S. Tax Return: U.S. Citizen or Resident with Foreign Income (http://taxipay.blogspot.com/2008/03/us-citizen-or-resident-with-foreign.html)
The inheritance grew to two million. The growth income was required to be reported as the U.S. taxes worldwide income.

2. You also had foreign accounts. You must also file Form TD F 90-22.1 (FBAR).

3. If your parents gift the money to you, they must file gift tax return and pay gift tax. The receiver of gift does not pay any tax.
There is life time exclusion limit of $1 million.

4. If your parents leave the money as per their will, they do not file gift tax return. But if the estate is more than the estate exclusion limit for that year, then you must file estate tax return.

5. If you have not file FBAR, and have declared all the income, then you can file FBAR from 2003 t0 2008 without any penalty.

While this forum gives excellent advice, the amount of money involved SCREAMS for competent, professional, face-to-face international tax advice from a local tax professional with experience in international tax matters.

Your family may end up paying this tax professional several thousand dollars for his advice, but it will be well worth it, if, for no other reason, than to avoid any potential pitfalls in properly transferring the money from your parents to you and your sister with the least amount of taxes due.

If your parents have not reported the income from the accounts, you should contact an international tax attorney immediately. The IRS currently has an amnesty program that they may wish to use. The program ends Oct. 15th. For more information about the IRS program, see Voluntary Disclosure: Questions and Answers (http://www.irs.gov/newsroom/article/0,,id=210027,00.html)