In the state of New York, the name Ed Koch is certainly a memorable one. The former three-term mayor of New York City died in February, and he left behind a sizable estate.
As an individual who was never married, Koch had no children. According to Forbes, he left his sister and her husband $500,000, and his sister-in-law and each of her two children got $50,000. Koch’s brother died back in 1955. He also provided a $100,000 bequest to his secretary.
The bulk of his estate went to his sister’s children. Observers point out the fact that this was an intelligent move from an estate planning perspective.
If Koch would have left most of his resources directly to his sister, that transfer would have been subject to the estate tax. Then, when his sister passed away, her children would be forced to pay the estate tax yet again on the financial legacy that was inherited from Ed Koch.
However, he may not have taken advantage of all the possible tax efficiency strategies that were available to him. For one thing, he could have given tax-free gifts up to $14,000 this year to everyone on his inheritance list. Last year, he could have given $13,000.
It is clearly very important to understand the power of the estate tax when you are contemplating your financial legacy. An expert who analyzed the situation is quoted in Forbes as estimating an effective tax rate of 24% on the Koch estate when you take into consideration the federal estate tax and the New York state estate tax.