When a person dies with a large estate, taxes can be an unwelcome surprise for many beneficiaries. In some instances, taxes can take a big chunk of the estate. With proper estate planning, however, some of these taxes can be avoided legally and allow beneficiaries to receive the money that was intended for them.
The estate of James Gandolfini, who died recently at the age of 51, may be hit hard with estate taxes. The actor’s estate is estimated to be worth nearly $70 million. In his will, Gandolfini named his wife, infant daughter and two sisters as beneficiaries of his residual estate. He left his 13-year-old son a life insurance policy worth $7 million and other friends and relatives specific amounts of money.
Because money left to a spouse is exempt from estate tax, Gandolfini’s wife would not have to pay taxes on her share except that Gandolfini specified in his will that his wife would have to help cover the tax expenses of the other three beneficiaries.
Although these taxes cannot be avoided all together, then could have been minimized by doing a couple of things. Gandolfini could have taken out a second life insurance policy specifically to cover at least part of the taxes. Instead of giving his sisters his assets outright where they will have to be taxed after his death and again after the sisters’ deaths, he could have set up a trust for each sister and named them trustees over their own trusts.
If you have are worried about how estate taxes will affect your beneficiaries, you may want to speak with an estate planning attorney about what you can do to minimize them.
Source: Fox Business, “Lessons Learned from James Gandolfini’s Will,” Gail Buckner, July 15, 2013