King Charles III has a tax benefit for most Britons that even many wealthy Americans could only dream of: The head of the British monarchy is exempt from UK inheritance tax.
The death of Queen Elizabeth II means the transfer of her personal wealth of about $500 million to her first son, Charles. That means he doesn’t have to send about $200 million of Queen Elizabeth’s $500 million estate to the tax collector.
But it also involves a change in ownership of the Crown Estate: a portfolio of assets and real estate valued at $34.3 billion. His holdings include Buckingham Palace and land and properties across London and the United Kingdom
To be sure, the Crown Estate is held in trust. This means that King Charles III cannot sell any of his assets. But the royal family still collects about 15% of the profits from the estate through the “Sovereign Grant.” Last year, the Crown Estate earned $311 million.
The tax exemption is among the list of luxuries that separate most Britons from the Royal Family in the United Kingdom, where voters are required to pay a 40% tax on property worth over $377,000.
In the US, when such levies are designed as a “death tax,” the burden on estates is simply a dying breed. Although most estates in America are not large enough to trigger the federal estate tax — an estate must be worth more than $12.06 million to do so — 17 states and the District of Columbia have laws that can tax a charge on a person’s inheritance or estate, or both. .
A $200 million piece?
Avoiding a 40% tax on $500 million is not trivial. But since wealth is often a relative term, the inheritance levy on Charles would not be a major part of the royal purse.
Queen Elizabeth II was the longest serving monarch in the United Kingdom, ruling over 14 Commonwealth realms as well as Britain, for seven years. In that time, the Crown Estate’s assets have grown enormously in terms of assets and real estate, valued together – but nowhere near the fortunes of the world’s richest people.
Crown assets are overshadowed, for example, by the success of Elon Musk, Jeff Bezos and Bill Gates.
Queen Elizabeth inherited an estimated $81 million after her mother died in 2002 – raking in assets ranging from prized horses and jewelry to priceless paintings and Fabergé eggs.
Over the years, those assets along with a healthy collection of real estate – including Sandringham House in England and Balmoral Castle in Scotland – have increased her net worth to around half a billion dollars.
Elizabeth received income through the Sovereign Grant, a taxpayer-funded pool of nearly $100 million in 2021 and 2022 designed to cover official travel and the operating costs of various properties, including Buckingham Palace, the official residence of queen
That grant stems from a centuries-old agreement in which King George III surrendered his income from Parliament in order to receive a fixed annual payment for himself and future generations of the royal family. Charles is now ready to receive income from the annual grant.
Death and taxes
Although Charles could overthrow the “death tax” — taxes seem certain. Even for royalty.
The official Royal website reported that the queen agreed to pay income and capital gains taxes in 1993 – despite having no legal obligation to do so – and voluntarily paid local taxes.
And according to a “Memorandum of Understanding on Royal Taxation” written in 2013, Charles indicated that he would voluntarily pay taxes on inheriting the throne.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.