The world certainly doesn’t seem to slow down — both here in the Shakopee, MN area, and beyond — does it? And now that the whole world doesn’t get to distract itself with the Trayvon Martin / George Zimmerman murder trial, there will certainly be a new thing to agitate us, at least if the media has its way with us.
They feed on anger, chaos, frustration and fear. I say, let’s not let them win.
That’s not to say: let’s not care about events that occur around our country and the world — but let’s not allow news media programming to set the agenda for our own inner world and our state of mind from day to day, and week to week here in Shakopee, MN.
But one media story from the past few weeks is worth revisiting, in my opinion, as it remains somewhat in the news. I’m talking about the very early passing of James Gandolfini (aka Tony Soprano). And, sadly, more than just a few thousand broken hearts, he left behind a big mess due to poor estate planning.
I hate to use tragedies like this to point out the necessity of it, but the fact remains that estate planning exists so that when tragedy does come (which is inevitable — only the timing is unknown), you aren’t piling further tragedy on top of tragedy, because of poor planning.
So, let’s put on my Shakopee, MN tax professional hat and take a look at what got left behind, and what it might mean for you…
Estate Planning “Lessons” from Tony Soprano and From Your Friendly Shakopee, MN Tax Service
It seems that Mr. Gandolfini’s will is a disaster.
The New York Daily News reviewed it, and found it to be a nightmare, at least from a tax standpoint. Apparently, the 51 year-old actor left 80 percent of his $70+ million estate to his sisters and his 9-month-old daughter — which, as result, means that his estate could owe Uncle Sam as much as $30 million.
In 2013, up to $5.25 million of an estate’s assets are exempt from federal taxation thanks to the American Taxpayer Relief Act passed earlier this year.
For amounts in excess of the exemption level, which is adjusted annually for inflation, the top federal estate tax rate is 40 percent.
New York also taxes estates and its exemption amount is much lower: $1 million. The top Empire State estate tax rate is 16 percent.
Transfers from one spouse to the other, however, typically are tax-free. We learned that lesson from Edie Windsor in her successful same-sex estate tax battle that led to the end of the Defense of Marriage Act.
But since Gandolfini left the bulk of his estate to relatives other than his wife Deborah Lin, most of that 80 percent worth of assets is now subject to the federal estate tax.
Plan ahead: Even if you don’t think your estate is large enough to trigger the federal estate tax, you still need a will to make sure your property goes where you want it to after you take the step away from this phase of life.
And it wouldn’t hurt to talk with an estate tax expert just in case. Your estate consists of everything you own and you might have more than you realize.
You’ll also DEFINITELY want professional estate planning and tax guidance if you live in one of the 16 states — Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Oregon, Rhode Island, Tennessee, Vermont and Washington — or the District of Columbia, that impose an estate tax on the state level.
As the Gandolfini situation illustrates, the state-level estate taxes usually kick in at much lower asset levels.
But even if you live outside these states, it’s worth it to consult with a pro to ensure that you’re not just avoiding taxes, but that your generational wishes and dreams are passed along to subsequent heirs and family members.
But do take note, potential heirs: In addition to an estate tax that is paid with money left by the dearly departed, some states also impose an inheritance tax. If you’re named as a beneficiary in a will, the inheritance tax is collected from you based on the bequest you receive.
All of which means — it’s important to have a guide along the way.
Do let us know if we can help you. It’s what we’re here for.