Friday, July 19, 2013
This post is supplied through the courtesy of Howard M. Zaritsky, a nationally-recognized expert on estate, gift, and generation-skipping transfer taxes, fiduciary income taxes, estate planning, and estate administration.
Recent articles linked from postings on this blog criticized the estate plans of James Gandolfini and Ed Koch, because both of these estates will pay significant state and federal estate taxes. Both articles suggested that lifetime gifts or changes in the selected beneficiaries could have significantly reduced the estate tax bills for these decedents. In defense of the estate plans of Messrs. Gandolfini and Koch, it is not wrong to leave one’s estate to the people one prefers benefit from it, or even to retain assets for one’s own lifetime enjoyment, even if it increases one’s estate tax bill.
James Galdolfini’s estate is estimated at $80 million, and his tax bill at $30 million; he may well have believed it more important that $50 million go to those family members he preferred than that a larger sum to to others.
Ed Koch’s estate is estimated at $10 million, and because he lived in New York City, where entry-level apartments often cost $1 million, he may reasonably have believed that he could ill-afford to reduce his available assets by lifetime gifts.
Tax planning is an important aspect of any estate plan, but taxes should not be the overriding consideration. First, one should determine the desired disposition of the estate, and then effect that disposition in the most tax-efficient manner. For all that we rear window observers know, Messrs. Gandolfini and Koch made intelligent, informed, well-reasoned estate planning choices.