James Gandolfini, the actor who played mafioso Tony Soprano on HBO’s The Sopranos, died on June 19 of a sudden heart attack. Gandolfini had a reported net worth of $70 million. He had executed a new will in December of 2012 and had created at least one trust, for his son Michael. Although the actor clearly put some thought into estate planning, his estate will end up paying millions of dollars in federal and state estate taxes, much of which could have been delayed or reduced through the proper use of trusts and other estate planning tools.
More than 80 percent of Gandolfini’s estate will be subject to federal estate taxes, at a rate of 40 percent for all assets above $5.25 million. The federal tax bill will be more than $20 million. The State of New York will also tax Gandolfini’s estate, at a rate of about 5 percent on the amount over $1 million and 16 percent on the amount over $10 million. State taxes could amount to about $10 million.
Gandolfini’s estate will pay more than was necessary in part because he chose to leave less than 20 percent of his assets to his wife. The estate tax does not apply to assets left to one’s spouse, until the spouse’s death, at which point the spouse can use both spouses’ estate tax exemptions. Gandolfini indicated that he had provided for his wife financially in other ways outside of his estate.
However, Gandolfini also left a will that subjects most of his estate to the probate process, rather than setting up trusts which could have provided more sophisticated estate planning and reduced the estate tax bill. Trusts also would have kept his affairs private and made them easier to administer.
The poor planning of Gandolfini’s estate is a lesson in the additional tax burden and other complications that can arise when someone relies too heavily on a will rather than properly-funded trusts.