All EB-5 investments must be thoroughly sourced to show they were obtained legally, ensuring the legitimacy of the investment. Investors can use multiple lawful sources to fund their investments. However, there is often confusion on the difference between a gift and an inheritance. The main difference between a gift and an inheritance is the time they are provided to an individual. While a gift is provided during a donor’s lifetime, inheritance is passed on to an individual after a person’s death.

Gifts

For a gift to be considered a lawful source of funds for an EB-5 investment, it must be freely given to an investor, and no repayment of money by the recipient investor can be expected or required. The donor must also show through extensive documentation that they obtained the funds legally. The investor must demonstrate that they received the funds as a gift and have no plan to repay the donor or provide them with anything of value in exchange for the gift. If repayment is expected or required, that would make it a loan, for which a proper loan agreement would be needed.

The following supporting documentation to prove the gift’s lawful source and transfer must be provided:

A notarized gift affidavit stating the amount of the gift, the date on which it was given to the investor, and confirmation that there are no side agreements or conditions to repay the donor
Personal income tax returns for the donor and investor
Documentation explaining the origin of the gifted funds, such as an asset sale agreement, W-2s, bank statements, and paystubs for income, or business registration records and bank statements confirming business income
Bank statements for the donor and investor demonstrating possession of the funds

Inheritance

Inheritance is the assets or money passed on to an heir after the owner passes away.

To document the inheritance properly, the investor should provide the following documentation:

Proof of inheritance, such as a will, trust, probate records, death certificate, or documents from an estate administrator
Confirming of relationship to the deceased if a parent or family member issued the inheritance
Proof of the deceased’s legal acquisition of the funds, such as bank statements, tax returns, purchase and sale agreements, property deeds, and other financial records like investment account statements
Bank statements or other documents from the estate confirming the transfer of assets to the investor

The documentation required to prove a lawful source and path of funds varies per source and per investor. Depending on the details and circumstances, a gift and/or inheritance can be a lawful source of funds for your EB-5 investment.

If you have any questions regarding EB-5’s source of funds, please email us at rpatel@patellegal.com and jtrevino@patellegal.com.