Wendy and Jen Wreck the Movies: King Ralph (1991), or “The Pumpkin Pie is Better Here”

What Happened:

The entire Royal Family of the United Kingdom dies during a poorly planned family photo session (but as anyone who has sat through a family photo knows, they may have faked it).

Meanwhile, on the other side of the pond (we tend to be cheeky), Ralph Jones works as a Las Vegas lounge singer and shares a dressing room with Mitzi, the Psychic Chimp. Mitzi may have seen Ralph’s unlikely future, but alas, she could not speak.

Ralph is fired from his singing gig, but he is visited by Duncan Phipps, the assistant secretary to Sir Cedric William. Over a “gastro death dealer with onions, jalapenos and Tabasco sauce,” Dunc gives Ralph the Royal 411. It appears that Ralph’s grandmother, Constance, sowed a few wild oats in her younger days, including a dalliance with the Duke of Warren. Ralph’s father was the product of the dalliance, and Ralph is the only surviving royal heir in the line of succession.

Ralph accepts the throne, but he is out of his element and is continuously undermined by the evil Lord Percival Graves who schemes to remove Ralph from the throne. Ralph’s lonely for home when he meets commoner Miranda at a local pub. Ralph and Miranda start dating. Percival bribes Miranda to create bad press and build public sentiment against Ralph. Ralph, a good guy at heart, wants to regain public opinion and for the sake of the monarchy he stops dating Miranda. Royal matchmaking commences, and a potential bride is identified.  At a banquet for said potential royal bride (who is as compatible with Ralph as fried pickles and caviar), Ralph starts rocking out to the Jeff Lynne version of “Good Golly Miss Molly” and locks eyes with Miranda.

Percival’s evil plan is uncovered, and he is arrested for treason. Ralph abdicates in favor of Cedric (whose great-grandma had her own dalliance with a prince).

Cedric seats Ralph as the Third Duke of Warren. Ralph and Miranda reunite, marry, and have a baby, Ralph Jr.. Ralph forms a band named “Ralph and the Dukettes,” which performs the hit, “Duke of Earl,” as the credits roll.

What Happens Next:

Ralph is introduced to Wendy & Jen by Josie Ponella, after Ralph performed with 45 RPM at the Rivkin Radler summer outing. Ralph tells them that he is a big fan of “Wendy & Jen Wreck the Movies,” and he was hoping to get a little advice. Since signature party cocktails and public discussions are bad preludes to sound legal advice, Wendy and Jen’s assistant, Dannette, runs a conflict check and schedules an appointment for Ralph.

Ralph tells Wendy and Jen that he surrendered his United States citizenship when he ascended to the British throne. Now that he has abdicated, he believes that he holds dual U.S. and U.K. citizenship. Ralph, his wife, Miranda, and their minor son Ralph II, want to move to Manhattan.

Ralph bought a townhouse in the Carnegie Hill neighborhood of the Upper East Side. He wants to turn the townhouse into a design studio and boutique for Miranda so she can launch her “House of Miranda” fashion line. Ralph wants to surprise Miranda by giving her the townhouse as a birthday present. Ralph also wants to make sure he has a Last Will & Testament because he now knows how precarious intestacy can be — especially for someone who does not have many close relatives.

After a quick google check to verify that Ralph is not pulling their legs with his seemingly outlandish story, Wendy and Jen walk Ralph through the legal issues and the best way to proceed.

Since the townhouse will be a commercial enterprise, Ralph should form an entity to hold title to the property. The real estate entity should be separate from Miranda’s business, the House of Miranda, which should then rent the townhouse from the real estate entity pursuant to a lease agreement (and of course all the entities need to be properly insured).

When Ralph asks about forming a limited liability company (LLC) or corporation to own the townhouse, Wendy and Jen tell Ralph that New York City has an unincorporated business tax which could affect his decisions, but that their colleague, Avi Sinensky, would be in a better position to provide counsel on the choice of entity.

Ralph tells Avi that his friend told him to form a Subchapter S corporation (“S-Corp”). Avi tells Ralph that an S-Corp it is not the right choice for Ralph right now because only U.S. citizens can be shareholders of Sub-chapter S Corporations. Since Miranda is not a U.S. citizen, this is not a viable option right now.

Avi also advises Ralph against holding the asset in a Subchapter C Corporation (“C-Corp”) because the profits of a C-Corp are subject to double taxation – they are taxed at the corporate level and then taxed again when the profits are distributed to the shareholders.

After further discussions, Avi recommends that Ralph form a New York LLC. Avi explains that an LLC offers Ralph and his family the asset protection of a corporation while providing favorable “pass-through” tax treatment without any of the restrictions on ownership that an S-Corp entails. Avi also explains that an LLC will give Ralph maximum flexibility with regard to management and distribution of profits. “Bully!! Bully!! Capital Idea!!” Ralph shouts. Avi works with Ralph and forms the King Ralph NYC LLC.

Ralph also consults with Wendy and Jen’s partner, Matt Zangwill, for advice on zoning issues related to running a business out of a residence and certain renovations Ralph is contemplating which may exceed Carnegie Hill’s height restrictions.

Wendy and Jen, after all of this coordinating, get down to business with Ralph regarding his estate plan. Wendy and Jen confirm with their partner, Henry Mascia, that Ralph did not automatically surrender his citizenship. The U.S. Department of State has adopted an administrative presumption that U.S. nationals intend to retain their U.S. citizenship when they naturalize as nationals of a foreign state, declare their allegiance to a foreign state, or accept non-policy level employment with a foreign government. Through some due diligence, Henry also confirms that Sir Cedric anticipated the issue and secured the proper authorizations so that Ralph would continue to be a U.S. citizen.

Spouses are typically entitled to an unlimited marital deduction for lifetime and posthumous transfers, but Miranda is not a U.S. citizen. Gifts to a non-citizen spouse are subject to a $164,000 annual exclusion, meaning any amount over the exclusion reduces Ralph’s federal estate tax exclusion amount. Since the United States taxes citizens on their worldwide assets,[1] Ralph needs to be cautious when making gifts to Miranda.

Wendy and Jen collaborate with their partner, Jeff Greener, and help Ralph create a plan that allows him to make gifts to Miranda while maximizing effective estate and gift tax planning. Ralph decides to make incremental gifts of LLC units to Miranda within the annual exclusion limit.

Since Ralph Jr. was born to a United States citizen while abroad, he may have acquired citizenship through Ralph. Miranda is not a United States citizen even though she is married to Ralph, but Henry explains that Ralph can sponsor Miranda to become a lawful permanent resident, which would allow her to live and work in the United States and eventually lead to citizenship.

Ralph is thrilled and invites, Wendy, Jen, Avi, Jeff, Matt, Henry, and their families to join him for Thanksgiving. After the awkward silence that follows this generous invitation, Ralph laughs, and bellows, “In our new townhouse, not in England! Everyone knows the pumpkin pie is better here!”

It is important to meet with knowledgeable estate planning counsel who work collaboratively with immigration, real estate and business attorneys when contemplating a change in citizenship and planning for non-citizen spouses. Live like a king and save the drama for the movies.

[1] Subject to international tax treaties.