Estate Planning Lessons From The Boss

Actor James Gandolfini’s untimely death at age 51 seemed more becoming of his infamous mobster alter ego “Tony Soprano” than of the actor who was described as graceful and generous.

Serious debate concerning Mr. Gandolfini’s estate plan commenced almost as soon as his Last Will and Testament became public. Commentators criticized the plan as ineffective and a tax “disaster.” This was in part because the plan resulted in millions of dollars in federal and potentially state estate tax being due.

This set of circumstances and facts provides several lessons for the rest of us.

Estate and “death tax” planning must be undertaken in a way that also educates the client.

In this way, the client understands the applicable laws, how those laws will impact their ultimate goals or how they may lower or increase the potential taxes occasioned at death.

Mr. Gandolfini’s death and estate plan offers insight into potential planning pitfalls.  It is important to remember that estate planning is not just for the rich and famous or those that work in dangerous professions, like racecar drivers.  It is also essential for the rest of us.

1.  Plan for the unexpected

No one gets to choose if or when we become disabled.  Nor can we choose how or when we die.  Therefore, maintaining an up to date estate plan is just as important as regular meetings with your tax professional and regular health examinations with your physician.

Your estate plan is unique to you, your family, and your goals. Accordingly, you should schedule conferences with an estate planning attorney.  If appropriate, your tax professional and financial advisor can also attend those meetings.

During those conferences, many topics should be discussed. Topics include, avoiding probate, minimizing or avoiding death taxes, providing for your spouse, partner or significant other, providing for your children and potentially protecting their inheritance from them, and if applicable, discussing off shore assets.

2. Avoiding probate

This can occur through the use of a planning document called a Revocable Living Trust or by naming beneficiaries on your assets. Your assets must be transferred into the Trust for it to become an effective way to avoid probate. A pour over Will which should also be prepared for items not normally placed in this trust, i.e. household furnishings or items that were not transferred.

Another method that helps avoid probate is to name beneficiaries on your assets. The beneficiary designations do not become effective until you die.  Remember that neither of these methods by itself avoids probate or minimizes death taxes.

3. Minimizing death taxes

This can be accomplished through a variety of planning techniques which can include making annual gifts (which can be transferred into trusts if desired), making charitable donations while alive or at death, and utilizing a number a number of different types of trusts such as life insurance trusts, marital trust, charitable trusts, and the list goes on.

4. Children’s ages and your goal for when they inherit

Many parents and grandparents think their heirs will be ready to receive and manage assets at 18 or 21.  Some children are more mature than others. Your estate plan can include a trust which distributes funds to your children at the ages you designate.

5. Make necessary provisions for any foreign property

International property can be subject to the inheritance laws of that country.  Another commonly forgotten factor is the cost of upkeep of a property until the time it is transferred to the named person.  This also highlights the importance of seeking localized legal advice in that foreign country.

For further information about creating or revising an estate plan, please contact our law office.

Planning ahead is a gift to your loved ones!