How King Charles’ Tax Breaks Are Saving Him Millions
While the world has been watching as the Queen of England reached her final burial place, others are talking about a completely different aspect of her death: the new king’s tax burden. Or, to put it more accurately, his lack of tax burden. However you may feel about the monarchy, their existence is a huge part of English culture and the nation’s economy.
The issue of King Charles III’s inheritance raises some important topics that you can apply to your own estate planning goals. Let’s talk more about your plans and how you can achieve them. Call Modern Wealth Law at 949-371-5003 to set up a consultation now.
UK Inheritance Taxes—and Why the King is Exempt
In the United Kingdom, people inheriting an estate have a tax-free threshold of £325,000. Anything they inherit above that sum is subject to a sizable 40% inheritance tax. That obviously takes a huge chunk of many large estates and funds a substantial amount of the country’s budget.
However, the monarchy is exempt from that law. In 1993, the Prime Minister at the time passed an amendment that would exempt assets passed from one sovereign to their successor from inheritance taxes. He states that such an exemption was necessary in order to preserve the monarchy. In his words, he worried that the assets would be “salami-sliced” away in just a few generations as a result of the 40% inheritance tax.
What does this mean for King Charles III? He inherited a £750 million estate. Excluding the £325,000 that would have already been tax-free, that leaves him with £749,675,000 that would have been taxed. Just under £300,000,000 would have been taken out in taxes.
Opinions on this are split. Some agree that the monarchy must preserve its assets to maintain its presence in the nation and the world, while others feel that royals should be held to the same laws as other UK citizens.
Planning Ahead
You, as someone living in the United States, may wonder how this applies to you. While you aren’t subject to the inheritance taxes of the United Kingdom, King Charles III’s estate is a good example for everyone. There’s a reason that the ultra-wealthy seem to maintain their wealth throughout the generations while the rest of the world—who lives on much less—loses a chunk every generation to taxes. It’s not just about the interest that large estates accrue. It’s a matter of estate planning and relying on the help of professionals.
Have you ever seen a wealthy individual pay little to no tax, even though you know they make more than 90% of Americans? Perhaps you also saw middle class or other upper class individuals go into assisted living, only to have the entirety of their estate drained to pay for it. Again, this all comes down to careful planning.
Protecting Your Family’s Future
In the United States, only a small portion of estates are taxed. The Joint Committee on Taxation estimates that only two out of every 1,000 estates are taxable. The top statutory rate is 40%, but in practice, less than 17% is usually taken.
However, estate taxes aren’t all you have to worry about. There are many other things that can chip away at the value of your estate. Incomes taxes and property taxes affect every person inheriting assets in California.
Creditors can make final claims on the estate, which presents the risk of fraudulent creditors coming forward to collect money they aren’t truly owed. The executor has to litigate these claims at the expense of the estate, which adds up quickly.
The estate must also be maintained while it’s superivsed and distributed. The costs of maintaining multiple properties, protecting assets, and paying bills for the maintenance of assets can also drive down the value of an estate.
A lot of these costs are part of the probate process. Probates in California can easily take years for even a simple estate. Probate itself can be costly, with fees in California starting at 4% of the first $100,000 of the estate and decreasing periodically until it reaches $25,000,000.
Setting up your estate to pass quickly to beneficiaries without the unnecessary intervention of the court system can help your family gain access to assets more quickly. It also limits the stress that often comes with probate.
Turn to Modern Wealth Law for the Estate Planning Guidance You Need
Strategic estate planning is key for those who want their beneficiaries to receive as much as possible. The extra-wealthy aren’t subject to different laws—they simply know how to utilize the advice of estate planning attorneys and financial advisors to improve their families’ situations. Let us help you make the most of everything you have worked so hard to gain. Schedule a consultation now by calling us at 949-371-5003 or contacting us online.
John Wong advises on all aspects of estate planning, probate, asset protection and trust administration. He believes that estate planning is about planning for life; while having protections in place should the unexpected occur.
