Queen to escape £28m inheritance tax
Under a deal agreed by John Major’s government in 1993, the Royal Family stands to save about 28 million in inheritance tax which would otherwise have gone to the state.
A combination of astute investment, diplomacy and a sprinkling of good fortune should ensure that the total value of the Queen Mother’s estate exceeds 70 million.
That would normally be taxed at 40 per cent, but under the deal with the Major government, and opposed by John Smith, the then Labour leader, the Queen will be able to exercise a "sovereign to sovereign" clause which exempts her from any liability.
The deal was agreed to safeguard the Royal Family’s financial future after the outcry over the cost of rebuilding Windsor Castle following the 1992 fire. The Queen had been forced to bow to public opinion and take on responsibility for far more of the Royal Family’s spending and it was felt that some sort of deal was needed to ensure that the monarchy could support itself in the future.
There have been suggestions in some quarters that the publication of the Queen Mother’s will, and the unusual tax arrangements, could provoke a fresh debate about the funding of the Royal Family.
The Queen Mother’s longevity also enabled her to avoid inheritance tax on a trust fund set up for the Princes William and Harry. Tax rules meant that if she could live for seven years after setting up the 19 million fund in 1994, she would avoid inheritance tax, a target she managed to exceed by a matter of months.
The money will be split between the princes, with Harry receiving the lion’s share to compensate for the larger slice of public funding which will be directed towards his brother.
Full details of the Queen Mother’s estate are due to be announced by Buckingham Palace this week, along with a reshuffle of the occupants of the royal residences.
Although the Queen Mother was reputed to have run up a 4 million overdraft at Coutts bank - and once confided that she had been scolded by her bank manager about her profligacy - she had built up a considerable fortune through shrewd investment in art, antiques and horses.
The Queen Mother received 643,000 a year from the civil list, and she used much of the cash astutely. Some of her better investments included paintings, a collection of Faberg eggs, china, jewellery and horses.
The art works alone are estimated to be worth in the region of 30 million. They include Monet’s 1889 Study of Rocks, Creuse, Fresseline, which she picked up for 2,000 in 1945 and which is now valued at up to 15 million. Other works in the collection include a Latour and a Millais and a series of John Piper watercolours. A painting by Raffaellino del Garbo - Madonna and Child with St John - is thought to be worth 500,000.
Her jewellery collection is valued at about 16 million, with one diamond and pearl necklace alone valued at 2 million. The collection also includes a 450,000 diamond tiara presented to her by her father, the Earl of Strathmore, as a wedding present and a diamond necklace that once belonged to Marie Antoinette.
Another 15 million can be added for the collection of porcelain, silver, Faberg eggs, antique furniture and clocks, and the rest if taken up by her horses and other smaller investments. Most of the art and jewellery collection is expected to have been left to the Queen.
There is some debate about the future of the horses but one theory is that they could go to Princess Anne’s daughter, Zara Phillips.
She has demonstrated an interest in riding and is also romantically involved with jump jockey Richard Johnson.
Although much of the estate is expected to go to the Queen, there are likely to be cash gifts for Princess Anne's children, Zara and Peter Phillips, and Prince Andrew's daughters, Beatrice and Eugenie.
Princess Margaret's children, Viscount Linley and Lady Sarah Chatto, may also be included in the will.
Although the death of the Queen Mother has now prompted the redistribution of her various homes, the only property she owned was the Castle of Mey.
She turned the 1,800-acre estate into a charitable trust in 1996 and it is now expected to be turned into a tourist attraction.
ROYAL RESIDENCES VYING FOR A PALACE OF ONE’S OWN
WITH the death of the Queen Mother, many of the Royal residences are effectively up for grabs and there is likely to have been some behind the scenes jockeying for position among the members of the family before the reshuffle is announced later this week.
The Prince of Wales is expected to move to Clarence House, his grandmother’s former London home, which could be open to the public for two months a year. It was also home to the Queen and the Duke of Edinburgh when she was heir to the throne. Prince Charles is also expected to take on Birkhall, the Queen Mother’s white-washed, 18th century Highland house on the River Muick at Balmoral, which is reported to be his favourite property.
It is thought likely that his current London home, St James’s Palace, will be let to Crown bodies such as the Royal Collection for official and ceremonial functions.
Royal Lodge at Windsor, where the Queen Mother died, is expected to become the home of the Duke of York. Royal Lodge, with its pink walls, 36 acres of grounds and a pool where the Queen and Princess Margaret learned to swim as children, was the Queen Mother’s home when she was Duchess of York.
Moving the Duke into the seven-bedroomed 19th century house would free up his present home, Sunninghill Park, which could then be put on the market.
The house, which is owned by the Crown Estate, could fetch up to 10 million. The Duke’s former wife, Sarah, Duchess of York, and their two children, Princess Beatrice, 13, and Princess Eugenie, 12, have already moved out.
Viscount Linley, the son of the late Princess Margaret, is expected to leave his mother’s former London residence at Kensington Palace.
The 16th century Castle of Mey, bought by the Queen Mother for 26,000 in 1952, was turned into a charitable trust in 1996. The Queen Mother had wanted it to be enjoyed by the public after her death and it is expected to become a tourist attraction, opening for five days a week from 4 August.