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Estate Planning Lessons from a Mob Boss (Part 2)

Last week we were discussing Soprano’s actor and New Jersey native James Gandolfini, more specifically his will and estate plan which has been the subject of much comment .  Some experts have said he created an estate tax mess for his family.  Is that really true?

The answer is maybe, maybe not.  While his will is a matter of public record, having been admitted to probate, that can only tell us part of the story.  There is much that Gandolfini could have done that will most likely remain out of the public eye, unless his family or attorneys choose to disclose it.

Gandolfini could have purchased life insurance to cover the anticipated estate tax hit we discussed last week and placed that insurance in a life insurance trust so it would not be subject to tax.  But since these trusts are not a matter of public record we don’t know whether he did or not.  He also could have set up trusts for his family members while he was alive and funded those trusts.  If set up properly and funded more than 3 years before his death, he could have removed those assets from his estate, and further reduced the estate taxes.  Again, we don’t know if he did this or not at this point.

Some question the wisdom of leaving assets in trust for his daughter only until age 21.  Most parents are uncomfortable with giving a child an inheritance outright at such a young age, often choosing to wait until the child completes college and then still have it distributed over a period of years.  That would be a real concern if millions go to this trust. But until we see how big the probate estate is, we won’t know for sure if this was a “questionable” decision.

It is also interesting to note that Gandolfini died a resident of New York, not New Jersey so he avoided inheritance tax, which is based on the relationship of the heirs to the decedent.  He left significant assets to his sisters, nieces and friends which would have been subject to New Jersey inheritance tax if that tax turned out to be greater than New Jersey’s estate tax.  New York doesn’t have an inheritance tax.  However, he did have a home in Tewksbury, New Jersey.  That asset will be subject to inheritance and/or estate tax, although it is impossible to say what the tax will be if any.

Finally, there is Italian estate tax to consider.  Gandolfini owned an Italian villa which he left to his two children.  It is possible that Italy may impose a tax on that property which could further take a bite out of his estate.  There may also be probate issues since some countries have laws which restrict foreign ownership of real estate.

So, what can we learn from James Gandolfini?  That there are very important reasons to estate plan and not leave things to chance.   Gandolfini could have taken advantage of these opportunities just as any of us can.  And maybe he did.  It’s just that we can’t tell by simply looking at his will and we may never know for sure if the details of what he did outside of his will remain a private affair.  But we do know that the law provides opportunities to plan.  It’s up to us to take advantage of them.