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How Will Meghan Markle's Finances Change Now that She Married Harry?
Investopedia ^ | 05/19/2018 | By Amy Fontinelle

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 it’s unique because Meghan is American – and, like many Americans, she is biracial. But while her race isn’t a issue, her nationality is – thanks to the U.S. tax code.

Prince Harry, Meet the IRS

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 that’s what will make the couple’s tax situation, and the family’s desire for financial privacy, so tricky to navigate.

Foreign Income Reporting

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 she’s required to report, even if it’s 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 don’t know if Markle will receive her own allowance or if she will be dependent on Harry’s.

In addition, Prince Harry earns money from a $1 billion portfolio of investment properties called the Duchy of Cornwall that funds his family’s 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.

Foreign Asset Reporting

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). Markle’s share of the royal family’s assets won’t 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 spouse’s liability for what is and isn’t 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 Harry’s 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 Out

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 Markle’s 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 women’s fashion line at Montreal-based clothing store Reitman’s, 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 Markle’s 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 won’t be able to renounce her U.S. citizenship right away. She will eventually become a British citizen, but she can’t even apply for citizenship until she’s 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 doesn’t have a worldwide tax system. But that wouldn’t solve the problem of the IRS learning certain details of the royal family’s 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 Bottom Line

The tax implications of the royal couple’s marriage highlight the complexities of the U.S. tax system. It’s convoluted enough if you’re a U.S. resident, and it only gets worse if you’re a U.S. citizen residing abroad. As the couple’s 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.


TOPICS: Foreign Affairs; Government; News/Current Events; United Kingdom
KEYWORDS: irs; meghanmarkle; princeharry; royals; taxcode; ustaxcode
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1 posted on 05/19/2018 8:32:28 PM PDT by SeekAndFind
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To: SeekAndFind

Article is correct.


2 posted on 05/19/2018 8:34:06 PM PDT by aMorePerfectUnion (Q is Admiral Michael S. Rogers)
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To: SeekAndFind

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.


3 posted on 05/19/2018 8:37:47 PM PDT by lee martell
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To: SeekAndFind

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.


4 posted on 05/19/2018 8:42:12 PM PDT by Reno89519 (No Amnesty! No Catch-and-Release! Just Say No to All Illegal Aliens! Arrest & Deport!)
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To: SeekAndFind

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.


5 posted on 05/19/2018 8:47:40 PM PDT by 2ndDivisionVet (You cannot invade the mainland US. There'd be a rifle behind every blade of grass.)
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To: SeekAndFind

She’ll renounce her citizenship. End of story


6 posted on 05/19/2018 8:49:02 PM PDT by Nifster (I see puppy dogs in the clouds)
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To: SeekAndFind

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.


7 posted on 05/19/2018 8:52:07 PM PDT by Kalamata (bibleresearchtools.com)
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To: Reno89519
All of the inbred monarchy articles and focus is unAmerican.

Maybe this is why Harry is marrying Ms. Meghan.

Definitely won't be able to use the tired, if true line about the Royalty being "inbred"

Ms Meghan's ancestry of deep, rich dark blood will enrich the thin, sickly pale blue-bloods of the Windsors.

"The queen is dead, long live the queen!"/sarc
8 posted on 05/19/2018 8:53:35 PM PDT by RedMonqey (" Those who turn their arms in for plowshares will be doing the plowing for those who didn’t.")
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To: Nifster

Really renouncing her tax slave to the IRS status....


9 posted on 05/19/2018 8:54:00 PM PDT by Paladin2
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To: SeekAndFind

It gets even more complicated if she has a railroad pension.


10 posted on 05/19/2018 8:56:43 PM PDT by P.O.E. (Pray for America)
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To: aMorePerfectUnion

She has to renounce her US citizenship.


11 posted on 05/19/2018 9:00:42 PM PDT by tiki
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To: lee martell
Megyn will have to renounce her American Citizenship just to avoid being overtaxed.

I'm sure Ms Meghan won't mind being "overtaxed" I'm sure she will see that all the added taxes are beneficial and that it will ultimately go to all the new liberal programs her SJM marriage will inspire both governments to pass in honor of our countries "special relationship" made even more "special"

Am I right? Am I?

Haloooooo!

Anyone? Anyone?
12 posted on 05/19/2018 9:01:26 PM PDT by RedMonqey (" Those who turn their arms in for plowshares will be doing the plowing for those who didn’t.")
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To: aMorePerfectUnion

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.


13 posted on 05/19/2018 9:01:30 PM PDT by reasonisfaith ("...because they received not the love of the truth, that they might be saved." (2 Thessalonians))
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To: SeekAndFind

At least she won’t be abusing the Earned Income Credit.


14 posted on 05/19/2018 9:07:20 PM PDT by Cedar
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To: SeekAndFind

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.


15 posted on 05/19/2018 9:09:45 PM PDT by Mr. Jeeves ([CTRL]-[GALT]-[DELETE])
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To: lee martell

Wanna piss off a liberal? Tell ‘em that John Lennon was a tax refugee from Britain.


16 posted on 05/19/2018 9:16:18 PM PDT by gundog (Hail to the Chief, bitches.)
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To: Nifster

I would have thought that a woman marrying into the royal family of a different country would take the citizenship of that country anyway...


17 posted on 05/19/2018 9:20:39 PM PDT by Jamestown1630 ("A Republic, if you can keep it.")
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To: SeekAndFind

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.


18 posted on 05/19/2018 9:20:45 PM PDT by lightman (ANTIFA is full of Bolshevik.)
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To: Jamestown1630

Per the article she can appply for UK citizenship in three years.


19 posted on 05/19/2018 9:27:10 PM PDT by GreenLanternCorps (Hi! I'm the Dread Pirate Roberts! (TM) Ask about franchise opportunities in your area.arare)
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To: SeekAndFind

Maybe she could slip through the Al Sharpton loophole, just don’t pay.


20 posted on 05/19/2018 9:34:55 PM PDT by Dalberg-Acton
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