People who are in possession of a great deal of wealth have a lot to lose via the imposition of estate taxes. There is a federal estate tax that is applicable to everyone in all of the states, and some states have a state-level estate tax.
In California, there is currently no state estate tax, but the people in New York are not as fortunate. In the Empire State, there is an estate tax that tops out at 16%, and the exclusion is just $1 million. The federal estate tax carries a 40% top rate, and the exclusion was $5.25 million in 2013 when this article was written. In 2014, the exclusion is $5.34 million.
Sopranos actor James Gandolfini was a resident of the state of New York when he passed away in 2013. As a result, estate taxes loom large for his family because he did not plan ahead according to informed observers.
About 80% of his $70 million fortune is being transferred via the terms of his last will. As a result, some $30 million may be lost to estate taxes.
The fact that the family will be receiving less than they could have is part of the equation, and clearly this is the largest part. If different steps had been taken, significantly more wealth could have been preserved.
Another facet to consider is a loss of privacy. Because the will was admitted to the probate court, all the details became available to the public, including the press.
Those who arrange for asset transfers outside of probate can avoid this public scrutiny.
Given the lessons learned from this case, you may want to discuss your situation with a licensed estate planning attorney sooner rather than later if you have taken no specific steps to preserve your wealth and your family’s privacy.