Recently, we lost a talented and relatively young actor, James Gandolfini, best known for his long-standing role as Tony Soprano in the HBO hit series, The Sopranos. However, that may not be the biggest tragedy. He is another example of an ultra-wealthy individual who did not engage in sufficient tax and estate planning. And when you mess up the estate planning, the money is gone to the government. Fugetaboutit. As Tony now knows, the government is the biggest racket in town. You need protection. That’s what Goodwin Weber PLLC does. We don’t use strong-arm tactics. We use calculators and some pretty smart lawyers.
James Gandolfini did have an estate plan. He had a will (http://www.scribd.com/doc/151472900/James-Gandolfini-Will) in which he left the majority of his assets to his sisters, wife, daughter, and son. But, his estate plan was relatively simple, and, inadvertently left a significant percentage of his estate to the IRS, an unintended bequest. This was a result of insufficient tax planning. There are a number of tax-savings techniques he could have engaged in. His wife was not the mother of his son, so understandably, he would not have left his entire, or even a significant portion, of his estate outright to her, which would allow him to take advantage of the unlimited marital deduction (http://wills.about.com/od/termsbeginningwithu/g/unlimitedded.htm). (And, with the new portability law (http://www.fpanet.org/ToolsResources/TipoftheWeek/PastTips/EstatePlanning/EstateTaxPortabilityDoYouStillNeedaTrust/), his surviving spouse could possibly – assuming she doesn’t remarry, which adds an extra layer of complication – use both her and Mr. Gandolfini’s combined federal estate tax exemptions (his unused exemption amount being known as the deceased’s spouse’s unused exemption, or “DSUE” for short).
However, even without leaving a significant portion of his estate outright to his surviving spouse, Mr. Gandolfini could have taken better advantage of the unlimited marital deduction and still assured that a particular portion was left to his son by using one of many estate tax planning techniques. One such possibility would have been to create a special type of marital trust called a qualified terminable interest property trust, or “QTIP” for short. Such trusts are fully blessed by the IRS to qualify for the marital deduction (assuming they are appropriately drafted and the election is made on the estate tax return), yet preserve the remainder of assets after the death of the surviving spouse for an alternate beneficiary. The trust can be drafted so that the surviving spouse has no control over the ultimate disposition of the assets and cannot redirect them away from the deceased spouse’s intended ultimate beneficiary. In other words, Tony messed up. He used to say, “you f**k up once, you lose two teeth.” Tony can’t give no teeth up now, he is dead. So he left the Revenue Service his money instead.
In addition, any assets left to certain charitable organizations, such as 501(c)(3) public charities, receive a charitable deduction. There are a number of techniques, including split-interest trusts (http://www.estateplanners.com/articles/what-is-a-charitable-split-interest-trust-2/) that would help shelter taxes but still provide for non-charitable beneficiaries of the decedent’s choice.
Now, many of us don’t have $70 million in assets, and don’t need advanced estate planning techniques. However, this is a good example of how a lack of planning can result in unintended results. Even if you don’t need sophisticated tax planning, without an estate plan, your assets may be distributed in a manner you would not have intended. Or, the lack of planning could leave family members disputing over “what mom/dad/brother would have wanted.” Contact an estate attorney (hopefully us in NY, NJ, DC, Minn., or Maryland) if you have questions about your estate and want to make sure you are sufficiently planning for your loved ones. Don’t do what Tony did. Don’t let the government racket get that money. Talk to us, we will help you sleep better at night.