Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

A Member of the Law Professor Blogs Network

Sunday, March 17, 2013

Taxes Take A Large Portion of Koch's Estate

Ed KochAs I have previously discussed, Ed Koch, the former mayor of New York, left portions of his estate to several different people and entities including the LaGuardia and Wagner Education Fund at CUNY. Unfortunately, they will only receive three-fourths of his $10 million estate. The other one-fourth will go to the federal government and the State of New York. This will likely be the case even after we take into consideration the unified credit and the New York estate tax exemption. Currently, under federal law, $5.25 million is exempted from the estate tax. There is a 40% tax on income that exceeds the amount. The New York estate tax exemption is $1 million, and there is a tax of 16% on income that exceeds the amount. Based upon these rates, it is likely that from Koch's $10 to 11 million estate the federal government will take about $1.45 million in taxes, and the State of New York will likely take about $1.1 million in taxes. He gave the remainder to his three nephews instead of his sister.

Some experts argue that this move is actually quite clever. They argue that had he given the remainder to his sister, the money might have incurred the New York estate tax again when she died. However, those same experts argue that it might have been better if Koch decided to leave the residue in a trust. This move would have protected the residue of the estate from his nephews' creditors. Some experts also argue that it might have been better for Koch to make a few deathbed gifts. This could have been helpful to reduce both his state and federal tax liability. It is important to remember if a person is going to make deathbed gifts, the gift must be complete before the donor dies. In other words, the donee must usually cash their check before the death of the donor.

See Deborah L. Jacobs, Ed Koch's Will: Taxes Take Big Bite Out of Hizzoner's Nest Egg, Forbes, Mar. 15, 2013.

http://lawprofessors.typepad.com/trusts_estates_prof/2013/03/taxes-take-a-large-portion-of-kochs-estate.html

Current Events, Estate Tax, Income Tax, Wills | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef017d41f5a9a5970c

Listed below are links to weblogs that reference Taxes Take A Large Portion of Koch's Estate:

Comments

Post a comment