You probably don’t spend a lot of time feeling sorry for a U.S. citizen named Meghan Markle, who is about to tie the proverbial knot with Prince Harry of England. But an article in the Wall Street Journal notes that Ms. Markle, and other American citizens who marry foreigners, face a lifetime of harassment by America’s Internal Revenue Service.
Suppose, for example, Ms. Markle’s new mother-in-law, who happens to be the Queen of England, lends her a tiara or diamond bracelet…what happens? She may need to tell the IRS about it. If she shares free rent for the residence at Kensington Place, its value could be reportable to the IRS as well. If (as is likely) Harry shares a credit card with her, and it is tied to a bank account that has more than $10,000 (which is also likely), this card and this account must be reported to U.S. authorities.
It’s possible that none of these things will raise Ms. Markle’s tax bill; there are severe penalties for not making the proper reports to U.S. authorities, possibly as much as half the total assets in an account. Assets that are held in trust can be taxed at rates up to 37%—and many English royal assets do happen to be held in trust. If there is income earned in England, or a pension, or a stipend for royal duties, that too is subject to U.S. taxes.
Of course, Ms. Markle could simply opt out of U.S. citizenship, which thousands of others have done over the years. But she wouldn’t receive U.K. citizenship for a potentially significant waiting period, which means she would still be dealing with U.S. tax rules in the interim.
This article was written by an independent writer for Brewster Financial Planning LLC and is not intended as individualized legal or investment advice, and any opinions expressed are solely those of the writer. Past returns do not guarantee future returns.