The Lesson from James Gandolfini’s Tax “Disaster”

12 Jul

new-york-cityStories involving celebrities and taxes pop up all the time.  However, most of these stories deal with income tax evasion or tax fraud.  A different type of celebrity tax story was released this week concerning the estate of James Gandolfini, the actor best known for playing the role of Tony Soprano.  In what has been described as a tax “disaster,” Gandolfini’s estimated $70 million estate is expected to take a substantial tax hit due in part to his decision to pass most of his estate through a will.  Now all the facts are not available, but it’s still alarming that someone with such high net worth would leave his estate in a will and not explore options involving any type of trust.  As a result of his decision, Gandolfini’s beneficiaries are certainly going to pay.

 

Minimizing estate tax is just one of the reasons to build an estate plan around a revocable living trust, but it doesn’t stop there.  To me, the decision to make a trust the backbone of your estate plan is all about proper PLAN.  See below for details:

 

P – PRIVACY

Trusts do not have to go through probate, thus they remain private.  This differs from a will or dying intestate, in which the deceased’s estate has to go through a formal court process.  Privacy is a major consideration because anyone can look up the value of a person’s estate and see who receives the distributions from the estate.

L – LONG TERM MANAGEMENT

Long term management is an important aspect of estate planning.  A trust will take effect immediately upon execution, while a will does not go into effect until a person dies.  Additionally, a trust can plan for the potential incapacity of the trust creator, allowing the management of assets to continue smoothly without involving the court.

A – AVOIDS PROBATE

Probably the most coveted reason for drafting a trust, as opposed to a will, is the avoidance of probate.  Probate is the formal process of distributing a deceased person’s assets to their beneficiaries, all done through the court system.  This whole process will generally take at least 9 months to a year, as well as have significant attorney’s fees.  A trust avoids probate altogether, saving significant time and money.

N – NO ESTATE TAX

Depending on the value of the deceased person’s estate, a trust can save individuals or couples significant amounts in estate tax.  This is particularly true for married couples.  The estate tax exemption is “permanent,” but could always still change in the future, so proper estate planning to minimize taxes is imperative.

 

This post is provided for informational purposes only and does not constitute legal advice.  It is intended, but not promised or guaranteed to be current, complete, or up-to-date and should in no way be taken as an indication of future results.  It is not intended to create an attorney-client relationship and is offered only for general informational and educational purposes.  You should not act or rely on any information contained in this website without first seeking the advice of an attorney.

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