Retirement Guys: Did Tony Soprano get whacked by the IRS?Written by Nolan Baker Mark Clair | | email@example.com
The recent death of the actor James Gandolfini whose most famous role was that of the mobster Tony Soprano, has sparked debate as to whether his will was a planning disaster or not.
If you saw the final episode of “The Sopranos” a couple years ago, you know that it ended in a way that no one really knows for sure what happened to Tony as he and his family were having dinner in a restaurant. There were several suspicious characters in the restaurant and the show ended with the screen going to black leaving the viewer wondering whether Tony was about to get “whacked.” I am sure the creators of the show planned it that way to create a buzz. I happen to think that Tony did not make it out of the restaurant.
Gandolfini died at the age of 51 and his death has sparked debate among estate planning experts as to whether his will was poorly designed, causing his estate to get “whacked” by the IRS. Regardless, it is a great opportunity to pause for a moment and consider some important things to think about when creating an estate plan.
Gandolfini reportedly left an estate valued at roughly $70 million with assets being left to his wife, his children, nieces, a godson, an assistant and a close friend. One of the issues being debated is that of taxes. Some experts are calling the will a tax disaster. Under the law a person can leave assets to his or her spouse under what is called the unlimited marital deduction — in other words, no estate tax upon the first spouse’s death. Gandolfini left some money to his wife, but left a large portion to individuals other than his wife that will trigger a 40 percent tax. On the surface this seems like a big mistake. I (Mark) am not so sure. It seems obvious that Gandolfini wanted to take care of people other than his wife. Getting money into the hands of these individuals may require biting the bullet (pardon the pun) and paying the tax. The lesson to be learned here is to consider what you want to happen to your assets when you die. If he wanted certain people to get assets he may have concluded that the money required to be paid in taxes was worth the desired result.
He also left a home in Italy to be shared by his children. What I wonder here is whether it is a good idea to leave an asset to be shared by two individuals. Apparently the ages of the two children are 13 and 1. They will obviously always be at different stages of life, so I wonder if they may have different ideas of use of the home, whether it should be sold, etc. It would seem better to leave an asset to one person outright to avoid conflict.
Evidently his children get control of millions of dollars when they reach the age of 21. Many would say that age is too young to be responsible for large sums of money. That is very possible, but sometimes if there are restrictions to access to assets, it can cause a big problem if something unforeseen triggers the need to access money and it is hard to get to. In this case, a trust could be drafted with a trustee overseeing it in case money was needed for health, welfare and maintenance or special situations. What is interesting about the will is that it leaves a $7 million life insurance policy inside a trust to one of his children. What I wonder here is, why this for one child and not the other? Will his children wonder why they were treated differently? He will not be around to tell them why he did what he did.
Here are some things Tony Soprano can help us consider when creating an estate plan:
- Think about the plan of distribution. What exactly do you want to happen with your money and stuff when you die?
- Taxes: How important is it to maximize tax efficiency? Consider potential consequences of being too tax-efficient.
- Consider not only the practicality of your plan but the emotional impact. Will your children be hurt if you do not treat them all the same? You will not be here to explain it to them.
- Think through each aspect of your plan to avoid conflict. You know how people can get when it comes to money.
There are many more issues to be considered, and the important thing is to not have your estate “get whacked” by poor planning. If you have not gotten your estate plan done, do not delay. Sit down with a professional and talk through all of the issues. Your family will be glad you did someday.
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