INheritance estate tax? permanent resident money in UK

Generally, no, provided your grandfather was not a US resident nor a former US citizen or long-term resident subject to the expatriation rules at the time of his death. You may, however, have to include on your income tax return any income (e.g., interest) generated by the funds since the time of his death, or since the time that the gift became yours without substantial restrictions on your ability to use the economic benefit of the funds. For example, assume that gf died 8/31/06 and left a specific bequest in his will to you; further assume that the executor had set aside the money to satisfy that bequest and had notified you that it was available as of 9/30/06. In that case, if the money were in an interest-bearing account, the interest earned from 9/30/06 forward would be your income and reportable as such on your individual income tax return. The mere receipt of the gift, however, is generally not a taxable event - at least so long as there aren't any funky facts floating around that you didn't post.

I have a similar situation. My wife's great uncle died in Asia this year. She is due a sum closer to $350,000.00. I understand the jist of the issue so far from this thread, but are there any restrictions as to dollar amounts or the type of relative it is coming from? What documentation needs to be filed to make everything legit?

Moderator: Neither the amount nor type of relative is not going to be a problem. If your wife's grandfather was neither a citizen nor a permanent resident of the United States, no problemo. However, for that kind of money, I would suggest contacting a CPA or and Enrolled Agent who specializes in inheritances.