Using Inherited Funds for an E-2 Investment

9 FAM 402.9-6(B) expressly recognizes inheritance as a potential source of investment funds.

The same provision expressly states that inheritance of a business itself does not constitute an investment.

Current 9 FAM 402.9 recognizes inheritance as a possible legitimate source of E-2 investment funds, but it also distinguishes inherited capital from an inherited business. Receiving money or other assets by inheritance can provide capital that is later invested in a qualifying enterprise. By contrast, simply inheriting ownership of a business does not itself constitute the act of investing required for the principal E-2 investor classification. The filing should therefore identify what was inherited and then separately show the qualifying investment transaction, possession and control, commercial risk, and commitment required under the E-2 rules.

The investor should establish the inheritance and receipt of the capital.

The funds can then be traced into the U.S. enterprise under the ordinary E-2 investment rules.

When the inheritance is cash, the record should establish the inheritance, the investor's receipt or legal entitlement, and the later movement of those funds into the E-2 enterprise. Probate orders, estate distribution records, bank statements, executor documentation, or other inheritance records may be useful depending on the jurisdiction. The evidence should connect the estate or decedent to the investor and should show that the investor obtained possession and control before or as the capital was committed. The inherited source is only one part of the analysis; the capital must still satisfy the ordinary E-2 investment requirements.

An investor may inherit real estate, securities, or another asset rather than cash.

Where the asset is sold to create investment capital, the record should connect inheritance, ownership, sale, receipt of proceeds, and investment.

An investor may inherit real estate, securities, a business interest, or other property rather than cash. If the inherited asset is sold or liquidated to create investment capital, the record should document the chain from inheritance to ownership, sale, receipt of proceeds, and eventual investment. Relevant evidence may include probate documents, deeds, account statements, sale contracts, closing records, brokerage statements, and bank credits. Where value changed between inheritance and sale, the financial records should explain the proceeds actually received. The objective is a coherent source and path showing how inherited property became capital under the investor's control.

Inheritance transfers ownership without requiring the heir to place capital into the enterprise.

A principal E-2 investor relying on an inherited enterprise therefore needs a separate analysis of whether qualifying investment has occurred.

Inheritance of a business is different from investing capital in a business. The current FAM expressly notes that inheritance of a business itself does not constitute an E-2 investment because ownership may pass without the heir committing capital to the enterprise. An heir seeking principal E-2 investor classification should therefore analyze whether a separate qualifying investment occurred, such as a purchase of additional interests, capital contribution, or other commitment that satisfies the E-2 requirements. The filing should avoid treating inherited ownership alone as the investment and should document any later transaction being relied upon to meet the statutory and regulatory standard.

An inherited ownership interest can affect treaty nationality and voting control even though inheritance itself is not qualifying investment.

Those issues should be analyzed separately.

Inherited ownership can still matter to other E-2 elements even though inheritance itself is not the qualifying investment transaction. An inherited interest may affect the enterprise's treaty nationality, the investor's ownership percentage, voting rights, and the ability to develop and direct the company. The record should distinguish those ownership and control issues from the separate investment requirement. Corporate records, estate documents, operating agreements, shareholder records, and voting provisions can help establish the post-inheritance structure. If several heirs received interests, the filing should show the resulting ownership percentages and explain who actually possesses operational control of the enterprise.

• Will or testamentary instrument
• Probate or estate records
• Distribution documents
• Bank records
• Asset ownership records
• Sale records if assets were liquidated
• Investment records

Inheritance evidence should be tailored to the form of property received and the transaction that followed. Useful records may include a will or testamentary instrument, probate or estate orders, executor records, distribution documents, bank statements, deeds, securities statements, sale or liquidation records, and the later E-2 investment documents. Foreign records may require translation, and older records may be incomplete, so the filing should identify what is available and use corroborating evidence where appropriate. A short chronology can connect the decedent, estate, investor, inherited asset, liquidation if any, receipt of proceeds, and final investment into the enterprise.