Skip to comments.How Will Meghan Markle's Finances Change Now that She Married Harry?
Posted on 05/19/2018 8:32:28 PM PDT by SeekAndFind
The marriage of Meghan Markle and Prince Harry is anything but ordinary. Even among royal marriages its unique because Meghan is American and, like many Americans, she is biracial. But while her race isnt a issue, her nationality is thanks to the U.S. tax code.
American citizens like Markle, who was born in Los Angeles, must report their worldwide income to the IRS even while living abroad. (For more, see How to Pay Taxes If You're Overseas.) She will have to file U.S. tax returns and Foreign Bank Accounting Report (FBAR) forms, assuming she becomes the signatory on or holder of accounts worth $10,000 or more. The penalties for not filing FBARs can be harsh and include both fines and possible jail time.
Although Markle has left her acting role as an attorney on the television show Suits, she will continue to earn residuals from reruns and DVD sales. But that income is insignificant compared to what she could receive as a member of the royal family. And thats what will make the couples tax situation, and the familys desire for financial privacy, so tricky to navigate.
Markle could have to report to the IRS as income the value of seemingly inconsequential things, such as being lent expensive jewelry, being given a vacation, or living in a Kensington Palace home with her husband. Merely failing to report something shes required to report, even if its not taxable, could result in major tax penalties.
Prince Harry shares with his brother, Prince William, and sister-in-law, Kate Middleton, the Duke and Duchess of Cambridge, an annual allowance that came to £3.5 million ($4.7 million) in 2017. We dont know if Markle will receive her own allowance or if she will be dependent on Harrys.
In addition, Prince Harry earns money from a $1 billion portfolio of investment properties called the Duchy of Cornwall that funds his familys public, charitable and private activities. Together, Prince Harry and the Duke and Duchess of Cambridge received several million from the portfolio in 2017. Prince Harry could also be receiving money from other royal trusts, but such information is not public.
The Foreign Account Tax Compliance Act (FATCA) will also affect the married couple. As long as Markle remains a U.S. citizen, she will have to file form 8938, Statement of Foreign Financial Assets, with the IRS each year. The reason: She will have an interest in foreign financial assets worth more than the threshold, which is either $200,000 (if she elects the married filing separately status) or $400,000 (if the couple chooses to file jointly). Markles share of the royal familys assets wont come in below either threshold.
Still, for other reasons, it will matter which filing status the couple chooses. Writing for the European Financial Review, San Francisco-based tax lawyer Robert Wood explains that while almost all married couples file joint tax returns with the IRS, Markle and her prince should choose the married filing separately status, which limits each spouses liability for what is and isnt reported on the return.
While choosing this filing status makes couples ineligible for certain tax credits and limits certain deductions, such concerns are unlikely to be meaningful for such a wealthy couple. More important, filing separately would mean Markle would not have to report Prince Harrys assets or income. The royal family would probably prefer that its finances not become the knowledge of the Internal Revenue Service. The temptation for someone to leak that private information would be great.
The only way for Markle and the British royal family to extricate themselves from the tax nightmare the IRS has created for U.S. citizens living abroad is for Markle to renounce her U.S. citizenship, something only a few thousand Americans do each year. But even if Markle renounces her U.S. citizenship, she will still have to report any U.S. source income from her acting residuals to the IRS. And should Markle renounce her U.S. citizenship, her high net worth could require her to pay an expatriation tax.
What kind of money is the future Duchess of Sussex bringing into the marriage? Celebrity Net Worth reports that 36-year-old Markles net worth is around $5 million. She earned about $450,000 annually as an actress in Suits, which she joined in 2011 (the show is entering its eighth season). She has also earned income from her womens fashion line at Montreal-based clothing store Reitmans, plus six-figure sums from her film appearances.
The IRS requires expatriating Americans to pay an exit tax if their net worth is $2 million or more on the date of expatriation, which Markles certainly will be. And she would have to file form 8854 listing her net worth and property owned on the date of expatriation and certifying that she has complied with all of her U.S. tax obligations for the past five years. The form includes a detailed balance sheet and income statement, too.
But even if she wants to or her in-laws pressure her into it, Markle wont be able to renounce her U.S. citizenship right away. She will eventually become a British citizen, but she cant even apply for citizenship until shes been married and living in the U.K. with Prince Harry for three years. So the couple will have no choice but to deal with the IRS for the next several years.
If the couple resided in the United States, Prince Harry would not have to file British taxes: Britain doesnt have a worldwide tax system. But that wouldnt solve the problem of the IRS learning certain details of the royal familys finances.
Some details are already public. The Duchy of Cornwall publishes annual financial statements of its income, expenditures and staff. And we know that Prince Harry brings an estimated net worth of $40 million into the marriage, according to the U.K.s Daily Mail. About one-third of his fortune comes from the $13.3 million he inherited from his late mother, Princess Diana.
The tax implications of the royal couples marriage highlight the complexities of the U.S. tax system. Its convoluted enough if youre a U.S. resident, and it only gets worse if youre a U.S. citizen residing abroad. As the couples totally unromantic tax story unfolds over the next few years, it will be interesting to see if the extra attention their situation brings to the difficulties of the U.S. tax code will spark any changes.
Article is correct.
I suspect when it all settles down, Megyn will have to renounce her American Citizenship just to avoid being overtaxed. A lot of Americans will say they don’t like or understand how someone could ever do that, but I do.
She will be financially secure for the rest of her life, even if the marriage doesn’t last that long. She may as well try to keep most of it. This is a common concern and dilemma of Americans living abroad.
All of the inbred monarchy articles and focus is unAmerican. Yes, let the IRS tax them, all their many billions of dollars. Go for it.
Her husband’s grandmother is the richest person on the planet with estimates going up to $30 trillion dollars, so I doubt that she’ll be on the roadside begging anytime soon.
She’ll renounce her citizenship. End of story
The Royals will likely be granted “an exception”.
I remember years ago, Rush stating that in IRS legislation, there are names of specific wealthy people who have their names written into the law that they are exempted. At the time, I was amazed at hearing this but now wouldn’t doubt it.
Really renouncing her tax slave to the IRS status....
It gets even more complicated if she has a railroad pension.
She has to renounce her US citizenship.
Except for one thing: we’re talking about a government agency that has transformed itself from following the legal concept of equality under the law to the tradition of some are more equal than others.
At least she won’t be abusing the Earned Income Credit.
Repeal of FATCA should be a top Administration priority. That it is not indicates that the GOP as a whole has been infiltrated by statists who are dead set on keeping American citizens as tax slaves. Rand Paul is the only member I have heard even bring up the importance of reforming this ghastly Obama-era overreach.
Wanna piss off a liberal? Tell ‘em that John Lennon was a tax refugee from Britain.
I would have thought that a woman marrying into the royal family of a different country would take the citizenship of that country anyway...
Incredible....we started a war with George III over the Stamp Act and Townsend Act only to create an even more tangled trap of taxation.
John Adams and Patrick Henry should disown us.
Per the article she can appply for UK citizenship in three years.
Maybe she could slip through the Al Sharpton loophole, just don’t pay.
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