Estate taxes can dramatically affect the financial legacy that you leave behind to your loved ones if you do not take the proper steps to plan ahead with tax efficiency in mind. To find an example look no further than the case of the recently departed actor James Gandolfini.
Gandolfini portrayed Tony Soprano on The Sopranos, and he struck gold financially when he landed the role and made it his own. Observers estimate the value of his estate at $70 million.
When you consider the fact that the federal estate tax carries a 40% maximum rate you are looking at some enormous potential asset erosion. If that was not enough, the actor was a resident of New York. The Empire State imposes a state-level estate tax. That top rate is 16%, and the exclusion is just $1 million.
Gandolfini did leave behind an estate plan, but it was not constructed with estate tax efficiency in mind. The majority of his holdings are being transferred through the terms of his last will.
When you hold on to your assets as personal possessions and direct their future distribution through the terms of a will they are fair game for the taxman.
A well-known estate planning attorney told the New York Daily News that the actor’s estate plan was a “disaster.”
When all is said and done it looks like the heirs to the Gandolfini estate will be faced with a total estate tax burden equaling some $30 million. With the proper planning much of this tax exposure could have been mitigated.