Why James Gandolfini’s Will is a “Tax Catastrophe”- How You Can Avoid the Same Fate
Published: Wed, 07/17/13
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Evan Farr's Elder Law and Estate Planning News |
Why James Gandolfini's Will is a "Tax Catastrophe"- How You Can Avoid the Same Fate Estate
Planning Mistakes of Celebrities Continued....
Last fall, our newsletter featured a series of articles entitled
"Lessons Learned from Estate Planning Mistakes of Celebrities," demonstrating
why probate is such a nightmare and lessons that can be learned from the costly
mistakes of celebrities. Celebrities, including Amy
Winehouse, Whitney
Houston, Michael
Crichton and Etta James who made estate planning mistakes, were explored. We will
now continue this series with James Gandolfini, who passed away last month,
leaving his heirs $70 million and a hefty tax bill.
James Gandolfini was born in Westwood, NJ in 1961. He began his acting
career in New York theater, where he got his first major role on the stage in
the Broadway revival of "A Streetcar Named Desire" with Jessica Lange
and Alec Baldwin. James' breakthrough role was his portrayal of Virgil the
hitman in Tony Scott's True Romance (1993), but the role that brought him
worldwide fame and accolades was as complex Mafia boss Tony Soprano in HBO's
smash hit series "The Sopranos" (1999). He died
unexpectedly of a heart attack last month in Rome at age 51.
The star's biggest mistake is that he didn't have even have a Living Trust, so his Will was filed publically in court (view a PDF
of his Will) and has to go
though the nightmare of probate in New York. New York has a very detailed probate system set forth in both the
state law and the court rules. As it is in most states, probating an estate in
New York can be time-consuming, taking up to 2 years to complete. It can also be
expensive, and can take anywhere from 3%-8% of your assets away from your
beneficiaries, which doesn't include estate and income taxes that may be due
and payable during the course of the probate administration. Compare this with
the cost of settling a Revocable Living Trust, which will range anywhere from
less than 1% to 5% of your assets. Lastly, as you can see from all the
information that is already readily available about Mr. Gandolfini's estate, probate
matters are part of the public record allowing anyone to find out the size, contents
and beneficiaries of the estate.
Besides forcing his loved ones to endure the horrendously
expensive and time-consuming nightmare of probate, it is certainly
eyebrow-raising to see that he left only 20% of his estate to his wife, Deborah
Lin, 30% to each of two sisters and 20% to his baby daughter Liliana, who was
born in October 2012. His 13-year old son,
Michael, was left an insurance trust worth $7 million, and all of his jewelry
and clothes. It's not known whether Gandolfini put any other assets into the
trust for Michael in addition to the life insurance policy. According to Gandolfini's long-time business
manager, Valerie Baugh, "Since Michael is so well provided for by the trust, he
doesn't need the court to appoint a legal guardian to protect his interests as
the case winds through the probate process."
For a character who made millions spurning the government on "The
Sopranos," it is ironic that in death, the IRS will likely claim almost half of
the actor's fortune. Because of Mr. Gandolfini's
failure to do appropriate Estate Planning and Estate Tax Avoidance planning, the
actor's estate -- valued at approximately $70 million - will likely have to pay
over $30 million in federal and state Estate Taxes. The total Estate Tax due will
be due a mere nine months after Mr. Gandolfini's untimely death. In all likelihood, significant assets will
need to be sold to generate liquidity to meet this Estate Tax bill.
How could this have been avoided?
It is possible that Mr. Gandolfini was told about the tax bill but
was willing to pay the tax as long as his goals were met in the will. In addition, given that he died younger than
he likely expected, he may not have completed estate-planning techniques that
would have removed some of these assets from his estate and supported his heirs
in other ways.
Here at The Fairfax Estate Planning Law Firm of Evan
H. Farr, P.C., we advise that
our clients should almost always use a Living Trust as their primary Estate
Planning tool, in order to protect assets at death from having to go through
probate. A Will allows you to direct who
receives your assets (i.e., who are your beneficiaries) and who manages your
estate (i.e., who acts as your executor), but a Will does NOT protect your
assets from becoming public knowledge and going through probate. Only a properly funded Living Trust protects
your assets from going through the "nightmare
of probate."
Did you know that 66 percent of adults don't have an Estate Plan? The catastrophic tax liabilities in this high-profile case serve as a reminder that putting off estate planning can hurt those left behind. Whether you have a $70 million estate or a $70 thousand dollar estate, proper estate planning is critical. And since the future is so unpredictable, it's never too early to get started with your planning. Call 703-691-1888 to make an appointment for a no-cost consultation at The Fairfax Estate Planning Law Firm of Evan H. Farr, P.C. today. |
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