Royal Baby Sussex, Meet Uncle Sam
The Duke and Duchess of Sussex, Prince Harry, and his wife Meghan Markle, recently welcomed a baby boy into the royal family. Amidst the joy and celebrations that often come with welcoming a new family member, this little one may require some proactive tax planning. Although born in England, the infant could find himself subject to taxes in the United States.
Why would a baby born in England be subject to taxes in the United States? The baby was born to an American mother. As a result, the infant is likely also an American citizen. In most cases, American citizens are subject to taxes regardless of where they live.
Tax obligations in the United States are based on citizenship, not residency. As a result, at some point during his life, the infant could find himself facing tax bills from the Internal Revenue Service (IRS). Seeing as the royal family is valued at an estimated $88 billion, the agency may be interested in following through on the new member of the royal family’s potential tax obligations.
How would it work? If Prince Harry and Meghan’s son chooses to retain his United States citizenship, the IRS may require he disclose income and certain assets held in foreign countries, like England.
The family’s advisers have likely already recommended either renouncing citizenship or making use of tax planning strategies to reduce or eliminate his tax burden. This could include the use of trusts to shelter his assets from the IRS. Additional tax strategies could include the use of foreign tax credits to reduce any remaining tax burden.