Meghan Markle's Baby Is in Line for IRS Headaches
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What is the main topic discussed in this episode?
With your money briefing, I'm J.R. Whalen at The Wall Street Journal in New York. Last year, we filled you in on the tax rules that Meghan Markle would face upon her marriage to Prince Harry. Well, now that she's with child, their son or daughter is in line to face his or her own maze of tax rules since the baby will be born a U.S. citizen. More on that in a moment. First, these money and market stories you should know. Mortgage rates have fallen to their lowest level in a year. Last week, the 30-year benchmark mortgage rate fell 10 basis points to 4.31%.
What tax issues arise when a U.S. citizen marries into British royalty?
Meanwhile, the 15-year fixed rate fell to 3.76%, and the 5-year hybrid adjustable rate mortgage fell to 3.84%. The number of available jobs in the U.S. edged higher in January to 7.58 million, just below November's tally of 7.63 million openings, and that was the highest level on record going back to 2000. Also in January, the rate at which employers hired new workers rose faster than the 2018 average. The Labor Department's monthly jobs report showed that employers added a robust 311,000 payrolls to the economy in January. Then they added just 20,000 jobs in February.
How will Meghan Markle’s unborn child become a U.S. citizen and what does that mean?
But the report showed the rate at which workers quit their jobs held steady at 2.3 percent for the eighth straight month. That's a historically high rate, just below a record set in early 2001. And research by St. John's University shows half of all inside traders targeted by authorities made less than $59,000, while nearly 40% were friends and relatives of company employees who were close to market-moving information. Still, though, the average take for insider trading defendants profiled in the St. John's study was nearly $1 million. And the study found that Wall Street workers such as brokers or hedge fund traders are almost five times as likely as other defendants to be criminally prosecuted.
And having more people involved in the scheme also influenced the decision of criminal authorities to prosecute.
Wouldn't you love to have the life of Prince Harry or Meghan Markle? Well, if you've had it with entangling U.S. tax laws, you might not. The royal couple is about to face the music, Congress and Treasury Department style, upon the arrival of their first child who will be seventh in line to the British throne. In her newest column, Wall Street Journal tax reporter Laura Saunders penned a letter to the Duchess of Sussex with some tips. And Laura's here in our studio. So, Laura, you think that the new baby would be born with a silver spoon in his or her mouth, and that would be that. But the baby is born a U.S. citizen, and that changes things a lot.
It really does. It's so interesting to think that this child, who is seventh in line to the British throne, is a U.S. citizen from birth. And there's really not any option to decline citizenship. You don't have to claim it, is what the experts tell me. It just is. It exists.
When can the royal baby renounce U.S. citizenship and what is the process?
And you can't just change it up with a stroke of a pen. It actually takes a long time.
Well, exactly. The child will be a U.S. citizen with no option to decline citizenship or to renounce it until he's or she is 16 or 17 years old. And at that point... the consular officer would take the child into a room without attorneys or parents present to make and have a very serious interview to make sure that this is a free decision freely taken and so forth. And so between when the birth happens and that point, the child is liable for U.S. taxes.
Wow. That sounds very intimidating, being hauled into an office.
Well, and they're very, very complicated when it comes to expats because there's a whole crazy quilt of tax laws and what you can do and what you can't do and what you have to report. And they were... They're kind of a mishmash, and they were passed at different times in reaction to abuses and things like that. And so this child is facing all that, or that is to say the child's advisors. We have heard that the royal family is quite concerned about this because it could mean opening some of their books to the IRS. And so they've hired a consulting firm or something to advise, a U.S.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:05–0:37
2
What tax issues arise when a U.S. citizen marries into British royalty?
0:37–1:18
3
How will Meghan Markle’s unborn child become a U.S. citizen and what does that mean?
1:18–3:05
4
When can the royal baby renounce U.S. citizenship and what is the process?
3:05–4:43
5
What U.S. tax reporting rules apply to gifts, trusts and foreign accounts for the baby?
4:43–5:40
6
How could British royal trust structures trigger IRS reporting and taxes?
5:40–6:42
7
What special reporting must Meghan file for personal benefits like loaned tiaras or travel?
6:42–7:28
8
What practical record‑keeping and expat tax lessons should others learn from this situation?
7:28–7:33
Speakers
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