The United Kingdom is coming out of a period of national mourning following the death of His Royal Highness, Prince Phillip, on 9 April 2021. As is so often the case when a family has lost a loved one, the period after the funeral is when thoughts and actions turn to the formalities in dealing with the estate of the person that has passed away. Whilst it is expected that Prince Phillip made a Will during his lifetime, it is unlikely to be made public. There are, however, certain expectations as to how the estate will be distributed as the Royal Family are, in many ways, like other families in the UK with many of the same considerations with regard to their estate.
Prince Phillip’s Estate passes to the Queen
It is common for spouses to have what is known as “mirror Wills” which direct that their estate is to pass to each other on the first death. In so doing, the estate will pass without incurring a liability to Inheritance Tax (IHT); this is the case even when the estate transferring to the surviving spouse exceeds the Nil Rate Band of £325,000.
In addition to this, the “Sovereign to Sovereign” deal struck in 1993 allows for estate passing from one sovereign to their immediate successor or from the consort of a sovereign to the reigning monarch, to be free from payment of IHT. This would mean that the Queen could, in due course, pass her entire estate to Prince Charles tax free as he is her immediate successor to the Throne.
There may be many that would question why the Monarchy should be exempt from payment of IHT when “mere mortals” are required to pay IHT at 40% on estates in excess of the Nil Rate Band. The justification for this is that members of the Royal Family cannot work or trade and cannot therefore increase their wealth and estate as other persons would throughout their lifetime. Without the expectation of growth in the usual way, the Monarchy’s private wealth would be repeatedly and significantly reduced with every charge to IHT as this wealth is passed throughout the generations.
Prince Phillip’s Estate passes to Charity
Prince Phillip was involved with hundreds of charities in many capacities. In the same way as the spouse exemption, any estate passing to a charity is exempt from payment of IHT. It would come as no surprise to his many supporters if the Duke of Edinburgh were to direct that his estate or part thereof was to be inherited by one of the many charities he supported.
In addition, if the Duke left a minimum of 10% to charity and directed that the remainder of his estate were to be divided by members of the Royal Family other than the Queen, any estate taxable element would be charged at a reduced rate of 36% rather than 40%. Any estate passing to other members of the Royal Family are not exempt from payment of IHT however there could potentially be a considerable saving if at least 10% was left to Charity.
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