Poor estate planning could defeat good intentions and actually leave more problems than assets to beneficiaries if estate plan tax implications have not been carefully managed. The recent death of actor James Gandolfini serves to highlight the pitfalls a person could face without a clear understanding of all the tax implications of an estate plan and how to choose the best methods for the distribution of property and assets.
Gandolfini left the bulk of his estate to his sisters and daughter. This means that 80 percent of his estate may now be subject to estate taxes. The IRS could be sending a tax bill for up to 55 percent of amounts in excess of the allowable exclusion. Because much of Gandolfini’s estate is likely not held in cash, property may have to be sold or other holdings might have to be liquidated to raise the money to pay the taxes owed.
The remaining 20 percent of his estate will go to his widow. In addition, Gandolfini had separate trusts set up for his wife and 13-year-old son. But the provisions of his will mean that a significant portion of his $70 million estate may go to the Internal Revenue Service.
Failing to consider the tax implications of wills and bequests can be costly to beneficiaries and may mean that the decedent’s wishes are not fully realized. An understanding of all of the legal implications of the provisions of a will and other estate planning documents is essential to making sure that wishes are carried out after a person’s death.
People with finances that require extensive and complicated estate planning -- as well as people who may not realize the full implications of choices they make, regardless of the size of their estate -- may wish to contact an attorney. An experienced estate planning attorney can explain the various legal instruments, such as wills and trusts that may be used to ensure that their wishes are carried out.
Source: New York Daily News, "James Gandolfini will a tax 'disaster,' says top estate lawyer," Dareh Gregorian, July 5, 2013