Keep Calm and Carry On

Allan Rolnick, CPA

The death of Queen Elizabeth II at age 96 last week is truly one of those moments that marks the passing of an era. The longest-serving Queen’s reign lasted through 14 prime ministers and fully 30% of our own country’s entire history. She was best-known for keeping calm and carrying on with a typically British stiff upper lip. Yet her subjects also loved seeing her sly wit, like when “she” parachuted into the 2012 Olympics opening ceremony with James Bond or shared marmalade sandwiches with Paddington Bear. Benjamin Franklin once said, “Nothing can be said to be certain except death and taxes.” (Ironic, considering Franklin cemented his legacy rebelling against taxes levied by the Queen’s 3rd-great grandfather, George III.) It’s especially true when it comes to estate taxes that governments levy on the privilege of dying. Naturally, we wondered what role taxes might play as her heir ascends to his grown-up job at an age when most of us have long since retired. England’s steep estate tax makes ours look like afternoon tea. The base exemption is a stingy £325,000 (about $377,000), growing to £500,000 for assets passing to surviving children and grandchildren. That contrasts with a far-more-generous $12,060,000 here. Anything above that is taxed at 40%, with exemptions for money passing to surviving spouses, certain business assets, farmland, and charitable gifts. Forbes pegs the royal family’s overall holdings at 28$ billion.

The Crown Estate, which generates income to pay the royals’ allowance, is a business entity established by Parliament to manage land and seabeds around England, Wales, and Ireland. The Duchy of Lancaster, which belongs to the monarch, includes farmland and commercial properties throughout the Kingdom. And the Duchy of Cornwall, which belongs to the monarch’s heir, includes properties in 20 counties of England and Wales, along with the right to any unclaimed shipwrecks on Cornish shores and all the treasure buried in Cornwall. Royal assets also include Buckingham Palace, Kensington Palace, and the Crown Estate of Scotland. Together, those portfolios generated £134.3 million last year. That’s a lot of crumpets! But while family members share much of that income, they can’t sell the underlying assets. That means they aren’t subject to the usual transfer tax at the monarch’s death. In that sense, they resemble so-called “dynasty trusts” that some Americans with royal pretensions are using to shield family assets from tax at any particular member’s death. The Queen held another £500 million in her own name: her personal jewelry, art, and lesser residences, including Balmoral and Sandringham. (You can rent parts of Sandringham on Airbnb!) That would still be a lot for His Majesty’s Treasury to tax. However, in 1993 – when the Queen agreed to pay tax on her personal income – Prime Minister John Major agreed that sovereign-to-sovereign inheritances would remain tax-exempt.

Finally, dog lovers worldwide have wondered what will become of the royal canines: two corgis, a cocker spaniel, and a dorgi (wiener dog-corgi mix). The Queen has owned corgis since age seven and bred 14 generations of the ridiculously-engineered beasts. They’ve loved her unconditionally and never embarrassed her by palling around with the wrong crowd or giving tell-all interviews to Oprah. The corgis, at least, are headed to live with Andrew and Sarah, Duke and Duchess of York. But will the pampered pooches still sleep in elevated wicker beds and dine on fresh rabbit? The lesson here is that while the Queen’s passing opens the door to a new vision of the British empire, it won’t, for the most part, be a taxable event. And isn’t that what you want for yourself? We’re here to help you plan for it, down to your crown and scepter!

Allan J Rolnick is a CPA who has been in practice for over 30 years in Queens, NY. He welcomes your comments and can be reached at 718-896-8715 or at allanjrcpa@aol.com.

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