Three Estate Planning Lessons From the Death of James Gandolfini

Perhaps the biggest lesson to be drawn from the media circus following the filing of the Gandolfini Will is that, when filed for probate, a Will and the accompanying probate petition become public documents. Most people, however, other than high net worth individuals and persons living in the public eye, are unconcerned that certain facts about their family and financial situations can be scrutinized by the general public following death.  For those who are concerned about such matters, there are alternatives to using a Will as the primary estate planning vehicle, such as transferring assets to a “Revocable Living Trust” which will preserve personal and family privacy. Given Mr. Gandolfini’s high profile, it was surprising to some that he used a Will to dispose of even a part of his assets.

3. Tax minimization is not the be-all and end-all of estate planning.

At the heart of any estate plan should be a sensible relationship between the testator’s assets and his or her intended beneficiaries. Nobody likes paying taxes, but it is unfair for several reasons to criticize James Gandolfini’s Will for a “failure” to make optimal use of estate tax minimization strategies.

First, use of the marital deduction often only postpones the payment of estate taxes until after the death of the first decedent’s surviving spouse, rather than “saving” estate taxes.  Any actual savings often is largely limited by the extent to which the surviving spouse could not fully utilize the available estate tax exemptions, without reference to an inheritance from the decedent.  If the estate of the surviving spouse would fully utilize the available exemptions, any savings might be outweighed by the estate tax on the appreciation of inherited assets occurring between the two deaths.

Second, non-marital deduction estate tax minimization strategies can involve a separation of control from value (e.g., a family limited partnership arrangement designed to obtain estate tax valuation discounts typically makes the limited partnership interests subservient to the controlling general partner, and a so-called “charitable lead trust” will require that the intended individual beneficiaries wait years to receive their inheritances) or even a complete loss of value (e.g., outright charitable gifts reduce the estate taxes payable, but also work a net reduction in the remaining non-charitable inheritances).

Third, many high net worth individuals (especially those who have made, rather than inherited, their own fortunes) take the position that it can be harmful to inherit too much money, robbing a young heir of ambition. Such persons devote more effort and attention to “incentivizing” their children and grandchildren than they do to maximizing their inheritances.

Fourth, when an intended beneficiary is very young (James Gandolfini’s daughter was only two months old at his death) or under some other legal disability, the primary concern should be to structure that beneficiary’s inheritance in ways that make practical, human sense.

The most valuable benefit from a probate petition being filed for Mr. Gandolfini’s Will may be the healthy debate it has sparked over the purposes and uses of estate planning and the care to be used in designing a plan that suits the intentions and situation of each individual.

Kantrowitz, Goldhamer, Graifman, Perlmutter & Carballo, P.C. – Wills, Trusts and Estate Lawyers