How Will Meghan Markle's Finances Change Now that She Married Harry?

Investopedia ^ | 05/19/2018 | By Amy Fontinelle

[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.

[Neoliberalnot]

There are no standards, even in the royal family. Standards in general are passé. We have tolerance and diversity to replace them. Name me ANY institution in the West that has not lowered its standards in the past 50 years. It has been necessary to be inclusive for shitbags. Education, Christian churches, business, the military recruit requirements etc etc. Government to the max!!! We have a Congressman from Georgia who thought Guam would tilt if too many people stood on one shore. That is a FACT! Today, stupidity, immortality and depravity take center court.

[Nifster]

Exactly

[huldah1776]

” specific wealthy people who have their names written into the law that they are exempted.

Like the deep sea oil drillers of Armageddon who saved the planet?

something needs to be overhauled, eh?

[RedMonqey]

Short of digging her up there's no convincing proof of her alleged African roots.

Hints yes but no proof the media is offering as the first "African Queen' She certainly didn't rule as an "Daughter of Africa" and made no claims as such during her reign

By this standard I could ("rightfully")claim heir to the Scottish Throne(My relatives descend from the Robert The Bruce line)

But I'm not packing my bags anytime soon...

"this supposed Moorish connection gave rise to a claim that the royal family of England had African ancestry via the 15-generation descent of Queen Charlotte of Mecklenburg-Strelitz, wife of George III of the United Kingdom, from Madragana, giving the Queen what the proponent described as the appearance of a 'mulatto'.[9] However, it is far from clear that Madragana's family was of negroid origin, nor is it likely that were she African, Madragana's negligible contribution to Charlotte's genetic makeup would have caused the Queen alone, among all of Madgarana's descendants at this distant time to display distinctive African features."

https://en.wikipedia.org/wiki/Madragana Wikipedia

Relying upon the opinions a painter to intrepid "negoid " features in a person is a insult to science, much less as genetic proof. This strays into "Ancient Alien" territory where opinion and speculation is pass off as proof and evidence.

So this is much to do about nothing. Any "African blood" was well watered down as to have no meaning at all.

America's so called one drop rule is ridiculously stretched to make Queen Charlotte "African"

Mis Meghan and her children, if they are so blessed, would be the first African nobility of the British Empire. No speculation involved.

[Tea Party Terrorist]

And be subject to an expatriation tax, and continued taxation on her US earnings.

[GreenLanternCorps]

No, the Letters Patent creating the Dukedom of Sussex are for Prince Harry. The title of Duchess of Sussex is a courtesy title of the wife of a Duke it is not in and of itself a title of nobility.

The honorific Her Royal Highness is granted to any wife of the son or grandson of the Sovereign under Letters Patent issued by King George V and King George VI. It is also not a title of nobility.

Under UK law only peerages (Baronies/Lord of Parliament, Viscountcies, Earldoms, Marquessates, and Dukedoms) are titles of nobility and only the title holder is noble.

[Nifster]

She won’t have US earnings

[Albion Wilde]

Whoa. Scratch a fairy tale, find a wicked witch beneath the glitter.

[Albion Wilde]

I suspect when it all settles down, Megyn will have to renounce her American Citizenship just to avoid being overtaxed.

And if the marriage breaks up, she'll feel like a woman without a country. They certainly staked a lot on this union.

I recall in the early days of the British Invasion how the Brit pop stars were constantly groaning about their oppressive tax system, so changing her citizenship might not help all that much unless things have changed. That was the basis of the Beatles' song, Taxman: "Now my advice for those who die / Declare the pennies on your eyes..."

[Albion Wilde]

the blood of his heirs won’t make any difference, barring a catastrophe in which William and his children all die at once.

William needs to stop flying in the same airplane with his wife and children. The royals even have a rule against it, but he does it anyway. They should at least fly the nanny with them and split into two groups.

[Albion Wilde]

That they had a bunch of Chicago ganstas singing “stand by me” should be the clue of how the communist gold digging fix is in.

Uh, those gospel singers are all British.

[Albion Wilde]

What is the problem. She files married/seperately. She does not work. She has no income. All the income is from Harry. No tax burder there.

Didn't read the article, then? As it explains, the residence he provides, jewelry, spending money, anything the IRS can deem "marital property" -- all taxable.

[Albion Wilde]

Charles married a commoner twice

Lady Diana was a member of the British aristocracy as the daughter of an Earl, and had more blood ties to past English royalty than does Charles. Kate Middleton, for all the common status of her self-made, wealthy parents, also has some royal bloodlines. Even the loathesome Camilla has some royal ancestry, including an ancestor who was the mistress of a past king, iirc Victoria's son Albert. So they are a little bit inbred, even though their ties to the Saxe-Coburg and Battenburg dynasties (and Prince Phillip's Danish and Greek royal heritage) are often resented.

[miss marmelstein]

She was a commoner. That is indisputable no matter how much she was a member of the aristocracy.

[Albion Wilde]

She is not the first biracial. Queen Sophie Charlotte was

Fascinating. I knew of her before, but as the article pointed out, the details of her heritage were downplayed, so it has never struck me before just how fraught this situation was, since she was the queen of King George III, the monarch of the American colonies before the American Revolution. It's eerie how this angle must have played into any discussions in the palace about slavery, in the colonies as well as in Britain.

It's also of note that William and Kate gave their daughter her name, Charlotte. They both majored in history and are not strangers to this topic.

[Albion Wilde]

Reading your link again, I find it eerie that Queen Charlotte, the first biracial queen, was buried in St. George’s Chapel — where Harry and Meghan’s wedding took place. Wonder if this was a factor in their selection?

[Flaming Conservative]

Queen Charlotte looks more like a Scotch Irish, to me, red hair, stubby nose and all.

[Albion Wilde]

An earlier post upthread disputes this claim of biracial heritage. I personally have no dog in this fight. Race means little. Religion is the important thing.

[Albion Wilde]

Some people see things in black and white; others see shades of gray. There are man-made rules and policies about titles; and then there are the God-given, natural bloodlines of the titled, which I believed is the main topic under discussion.

[miss marmelstein]

Your original post was taken directly from Closer Magazine. That’s not exactly Burke’s Peerage. It is what it is; Diana was a commoner although a member of the aristocracy. That is how she came to the attention of the royal family to begin with. A commoner does not mean that she or any of the other women were “common.” Merely that they were/are not members of the royal family. Once she married Charles, she became a member of the royal family.