Proper estate planning can help you avoid estate taxes (and other expenses)
Learn from Soprano star James Gandolfini's estate planning mistakes.
September 07, 2013 /24-7PressRelease/ -- Proper estate planning can help you avoid estate taxes (and other expenses)
Article provided by Troncelliti Law Associates
Visit us at http://www.troncellitilaw.com
When the actor James Gandolfini died earlier this summer, many mourned him. The actor, famous for playing the tough guy mob boss Tony Soprano, was in reality a generous person. However, when his will was made public, it was revealed that maybe the actor was a little too generous with the Internal Revenue Service, as his will was written in such a way that did not take advantage of the many asset protection options that would have minimized estate taxes.
Although Gandolfini likely had his reasons for dividing his sizeable estate (estimated at $70 million) the way he did, many estate planning professionals have commented in the media that he could have saved millions if he had done it a different way. As it stands, he will likely lose up to half of his estate to the taxman.
Although your estate may not be as large as Gandolfini's, his experience can serve as an important lesson of the value of sound estate planning. The following are examples of tax breaks that were possibly overlooked in his estate plan.
Trusts for tax avoidance
Gandolfini only used a will to distribute a large portion of his assets to family members. Unfortunately, doing it this way subjected his estate to taxes.
Like a will, trustsallow you to transfer your property to whomever you would like immediately after your death (or whenever you would like). However, a trust is an important supplement to a will because it offers many asset protection benefits. For one, trusts allow your estate to avoid the delay and expense of probate, which can reduce the size of your estate.
Tax-free transfers to spouses
Under federal tax laws, there are unlimited tax-free transfers to spouses up to a point. Most bequests of money or property that are valued above $5.25 million can be subject to taxes. Gandolfini only left about 20 percent of his estate to his spouse, meaning that he subjected 80 percent of his estate to federal and state taxes of 55 percent in his case.
When making out your estate plan, you can avoid losing a significant portion of your estate to taxes by taking advantage of the tax-free transfers to your spouse.
An estate planning attorney can help
Under the American Taxpayer Relief Act passed in January 2013, Congress has permanently set the federal estate tax exemption at $5 million, but indexed each year for inflation ($5.25 million for 2013). As a result, many estates will not need to worry about federal estate taxes.
However, this does not mean that the average person does not need a sound estate plan, as the average estate can be subject to other taxes and fees that can be minimized or avoided. An experienced estate planning attorney can help put an estate plan in place that will carry out your wishes and protect your estate from unnecessary costs and minimize the tax implications.
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