Estate Planning Gone Wrong? The Federal Estate Tax due on James Gandolfini's estate could be pretty stiff.
'A wrong decision is better than indecision.'
Sorry, Tony, but in your case that may not be true. James Gandolfini, the actor who played the iconic mobster Tony Soprano, died unexpectedly at age 51 while on vacation in Italy this June. He left behind an estate worth approximately $70 million dollars, the beneficiaries of which were his wife, their infant daughter, his son from a prior relationship, and several beloved relatives and friends. On Friday, September 6, Gandolfini's will was offered to a New York City court for probate. Once a will is submitted for probate, it becomes part of the public record. You can see his will here. In his will, James Gandolfini made one very large bequest that he did not intend to make. It could be worth as much as $30 million dollars and the beneficiary is the IRS. Gandolfini's will did not adequately plan for Federal Estate Tax and this mistake will result in a huge tax bill for his beneficiaries to pay.
With his large net worth, Gandolfini is one of the very few Americans whose estates are still subject to Federal estate tax. What is Federal estate tax, you ask? After someone dies, the Federal government levies a tax on any property the deceased individual held and passes on to surviving beneficiaries, as long as their total estate is worth a certain amount. The property does not need to be disposed of by a will - Federal estate tax includes all non-probate property as well, such as life insurance, IRAs, 401(k)s, jointly titled bank accounts, and trusts. In 2013, Congress passed new estate tax laws, which set the exemption amount at $5.25 million for an individual and, essentially, at $10.5 million for a married couple.
This means that a married couple can have up to $10.5 million dollars between them and none of it would be subjected to Federal estate tax. A single individual who dies owning up to $5.25 million would also not have to worry about Federal estate tax. For those people who have gross estates worth up to and above these limits, there are many great tax planning tools to be utilized. Mr. Gandolfini's will, however, does not appear to employ any of them. This means that any property the government considers to be part of Mr. Gandolfini's gross estate will be taxed at a rate of 40%!
When high net worth individuals are creating an estate plan, tax planning is key. Without proper planning, it is possible that, like James Gandolfini, almost half of the decedent's estate (or more!) can be lost to taxes. I think it's safe to say very few people, if any, wish to see their estate pass primarily to the government. A lack of proper estate planning could be just as disastrous as having no will or estate plan at all.
Are you concerned about Federal estate taxes? Call our firm today at 724-940-0100 and speak with a Pennsylvania Estate Planning Lawyer to discuss your options.