There’s more to estate planning than simply trying to minimize taxes under the provisions of a will and various trusts, as criticism over the will of the late James Gandolfini attests. A number of estate experts have weighed in the provisions of the will, which was filed last week in Manhattan Surrogate’s Court.
They point out the fact that there will be a rather large “hit”—to the tune of some $30 million, a large part of which could have been avoided, they say, with proper planning (see Gandolfini’s Will Leaves Family Exposed to Heavy Estate Taxes).
After the boilerplate regarding payment of just debts, funeral expenses, etc., Gandolfini's will directs specific payments of $500,000 to each of his two nieces, $200,000 to a personal assistant, $100,000 to his godson and varying amounts to three “friends.” It also gives a first option to a trust set up for his son to purchase a condominium unit, together with a parking space, in Manhattan’s West Village. It lists other provisions made for his wife and son outside of the will, and divides the residuary estate 30 percent to each of two sisters, 20 percent to his wife, and 20 percent to his daughter.
Experts who proclaim the will a “disaster” and a “catastrophe” point out that the 80 percent of the residuary estate left to his sisters and daughter leaves that amount completely unsheltered from the estate tax, which could be as high as 55 percent, including state taxes.
While a large portion of that could have been sheltered by marital trusts, even now the tax hit could be ameliorated by having Gandolfini’s sisters and daughter renounce their shares in the estate presumably for some payments later on, according to some experts.
But Gandolfini may in fact have considered his various options, and decided to go the route he did out of full knowledge of the tax consequences, according to Larry Peck, a New York-based estate planning attorney. “The problem with jumping to conclusions is that sometimes your own personal desires will trump estate taxes,” he said.
“These are people he wanted to benefit, and obviously he did not want to leave everything to his wife,” said Peck. “The critics assume he got no tax advice, but he may have gotten good tax advice, and decided, ‘Yeah, but that’s the way I want to do it. These are the people I want to benefit.’ You can’t conclude that just because there’s a big estate tax that he wasn’t well advised.”
“Some of the comments and criticisms assume that Mr. Gandolfini and his estate planning advisors were unaware of the tax implications of the will,” said Peck. “This seems highly unlikely. It’s more likely that Mr. Gandolfini and his estate planners advised him of the tax hit, but that Mr. Gandolfini nonetheless chose to leave most of his estate to persons other than his wife.”
“He certainly could have set up a marital deduction trust and postponed the other beneficiaries taking their inheritance, but that wouldn’t eliminate the tax; it would just postpone it,” said Peck. “He must have been given that option and decided not to have the other beneficiaries wait until his wife died to get what he wanted them to get.”
Marty Davidoff, CPA, Esq., of Dayton, N.J.-based E. Martin Davidoff & Associates, agreed. “He could have put a lot in trust for his wife, but maybe he simply didn’t want to. Possibly he wanted his son to have it now and not wait until his young wife dies.”