Tony Soprano’s will got it right

Lawyers are tut-tutting over the taxes due on the probate estate of James (Tony Soprano) Gandolfini. He was worth some $70 million when he died of a heart attack while traveling in Italy in June. He left the bulk of his money to his sisters, wife and children — some in cash, some in trust. The estate-tax bill will probably run around $30 million, according to New York attorney William Zabel. Shocking, he says. The heirs were rooked.

Rooked? When they get to divide $40 million they didn’t earn?

Legal beagles had lots of posthumous advice for Gandolfini and his legal team. Why wasn’t there a larger insurance trust? Howcome he hadn’t set up a family partnership to shift assets out of the estate? Surely, they buzzed, Gandolfini would have twisted his estate into more trusts and tax shelters, had he lived a little longer.

But maybe Gandolfini was the smart one. Simple trusts for minors or for people who don’t want to handle the money are one thing. But other kinds of trusts can severely limit your family’s choices and keep them tangled with lawyers forever. Also, when you need money, it’s no fun going cup-in-hand to a bank trustee.

Let the next generation make its own life, free of the dead hand from the grave. Putting taxes ahead of family means that you’ve got your priorities wrong.

I also have no problem with the size of the estate tax. A country where citizens can earn so much money, by their talent alone, is worth supporting. Maybe Gandolfini thought that way, too.

Leaving $40 million for your family ought to be enough.


FOP // 07/19/2013 at 2:29 am

Ms Quinn-
I disagree completely. There is no compelling reason why the government should conficate 43% of Gandolfini’s estate. He should have planned better so that he paid the minimum amount owed, with the balance gointg to family, charities, etc.

Planning need not have been complex at all. If he had a 30M life insurance policy, inside an ILIT with someone else as trustee, so the proceeds would not be partof the estate, the government would have gotten its 30M from the policy…and the entire estate value of 70M could have passed to the heirs. Simple and clean.

Jane // 07/20/2013 at 3:05 pm

Your plan would work — Roughly speaking, the gov’t would still get its $30M, so there’s no reduction in estate taxes. Gandolfini would have effectively pre-paid those taxes in the form of insurance premiums on a large life policy. But you have to consider the possibility that he didn’t want to pay those premiums and thought that what he was leaving his family was enough.

Linda // 07/19/2013 at 7:16 am

There is another side to this story. My middle class parents died in NY about 11 years ago. With their house and savings, their estate was just over a million. That should have been a nice, not big, inheritance for their kids. After estate taxes, very little was left to be divided by 5 children.

Jane // 07/20/2013 at 2:59 pm

You email puzzles me. In 2002, no federal taxes were levied on estates worth $1 million. The same was true in NYState. Perhaps some of the money was in tax-deferred retirement accounts? Income tax is due on money inherited from an Individual Retirement Account.

Ed Slott // 07/19/2013 at 8:40 am

Excellent! I was thinking the exact same thing as I read all of the comments from famous attorneys bashing the plan Gandolfini created for the people important to him. If his heirs cannot live on $40 million, then it’s on them. I have never been a fan of ruling from the grave, except when it is necessary (creating a trust for a disabled child, for example). Great work Jane!
-Ed Slott, CPA

Joel L. Frank // 07/19/2013 at 12:30 pm

I vehemently disagree! 43 percent of his wealth goes for estate tax. His wealth came from current income—so he already paid income tax on the 70 million or on most of it. This is no more than simple DOUBLE taxation and is wrong.

If it is not wrong then why are trusts allowed to be established to protect us from such an outlandish tax bill?

Dalton Edwards // 07/22/2013 at 10:53 pm

I note that some of the dissenting opinions come from people who intimate that the government is somehow guilty of theft by establishing an inheritance tax (e.g., “confiscating,” “outlandish tax bill”). Doesn’t our government need revenue to operate a military, provide roads, monitor the safety of pharmaceuticals, etc, etc, etc. Also, are the critics really concerned about Gandolfini’s family, or do they have an axe to grind about the inheritance tax?

Bob Bryant // 07/24/2013 at 4:42 pm

Somebody has to pay the taxes needed to keep our country healthy and strong. If people worth $70 million don’t pay high tax percentages, the burden falls on low net-worth people through other taxes. Concentration of the nation’s wealth in the 1% has already passed what can reasonably be regarded as healthy for the nation in the long term.

Little or no taxation on estates, as has been proposed, enables individuals lucky enough to have wealthy parents not to work at all, becoming part of a non-incentivized, non-productive “leisure class.” I prefer Warren Buffet’s approach. And Bill Gate’s approach. Ensure your family will be comfortable, but let them enjoy the dignity of ultimately earning their own wealth. And avoid the risks that leaving significant wealth to future generations through trusts may end up in family recriminations and lawsuits.

Linda // 08/16/2013 at 7:32 am

This system did not let me reply above to your comment, so this new comment. I guessed at the year, my mother died November 21, 2000. Dad passed a year and half prior to this.

Jane // 08/16/2013 at 2:52 pm

NYState enlarged the amount of money exempt from estate taxes in Jan, 2002. But even before then, the first $300,000 was exempt. For higher amounts, rates started at 2 percent and rose gradually. The top rate was 21 percent on estates over $10 million. So I’m still puzzled as to how a $1 million estate could have been eaten up by taxes. That’s why I’m wondering if income taxes on a retirement account is part of the picture. Otherwise, I have no idea.

Dave // 09/02/2013 at 9:07 am

You are right on target with your analysis, Jane.

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