Wednesday, July 10, 2013


The terms of James Gandolfini’s December 2012 Last Will and Testament were made public last week when it was filed in New York County Surrogate’s Court. There are a series of specific bequests to his teenage son by his first marriage and some friends and relatives, but the bulk of his probate assets is disposed of as his “residuary estate” and is divided among his sisters, his wife and his baby daughter.

The tax clause of his Will directs that all estate taxes are to be paid from his residuary estate. What does that mean to his beneficiaries? And what does that mean to the IRS and to the NYS Department of Taxation and Finance? Only the 20% of the estate that passes to James Gandolfini’s widow will qualify for the Federal and NYS estate tax marital deduction. (For a more detailed discussion of the federal marital deduction, see our prior post in anticipation of a ruling in the recently decided Windsor case, Will SCOTUS Eviscerate DOMA? What Effects Could That Have on Tax Planning?)  As a result, his estate could be subject to taxes at a combined rate of about 50% over his unused lifetime exemption, which is $1M for NYS and $5.25M for the IRS.

It is rumored that Mr. Gandolfini’s estate is worth approximately $70M. The total estate tax due is likely be over $25M and will be due a mere nine months after Mr. Gandolfini’s untimely death. In all likelihood, assets will need to be sold to generate liquidity to meet this estate tax bill. (more…)

Monday, July 9, 2012

Since Tom is back in the news this week, and because I finally watched Ghost Protocol this weekend, I thought I’d re-post this November 2011 blog on Tom Cruise’s possible use of life insurance in his estate planning.  Keep in mind, based on any divorce settlement agreement he reaches with Katie Holmes, Tom’s need to maintain life insurance may change.

When I first saw this video of Tom Cruise performing his own stunts on the outside the Burj Khalifa in Dubai (the tallest building in the world), a mile and a half above the earth, for the movie Mission: Impossible — Ghost Protocol (aka Mission: Impossible IV),  my first thought was, “Wow, how much life insurance do you think he has?”  My next thought was “Think of the estate taxes his estate will have to pay on those life insurance proceeds if the life insurance isn’t held in a proper irrevocable life insurance trust.”  (Yes, as my law school friends would say, that’s the estate planning nerd in me coming through!) (more…)

Wednesday, May 16, 2012

As Facebook prepares to go public on Friday, many news articles, such as this Forbes article, have discussed the fact that Facebook co-founders Mark Zuckerberg and Dustin Moskovitz have funded annuity trusts, most likely Grantor Retained Annuity Trusts (GRATs), with Facebook stock.  This stock is set to increase exponentially in value with the IPO takes place on May 18.  If these annuity trusts are, in fact, GRATs, they may be transferring millions of dollars worth of Facebook stock to their beneficiaries, potentially free of any transfer tax.

For more information on the benefits of planning with Grantor Retained Annuity Trusts, see our September post by Justin Flach and Doug Stanley, GRAT Planning in a Down Market.

Thursday, April 19, 2012

With guest co-blogger Melissa Fernley.

Last month, prominent businessman and Florida socialite John Goodman filed a petition to adopt…his girlfriend. This unconventional move, coupled with Goodman’s notoriety as the multimillionaire founder of the International Polo Club Palm Beach, prompted news outlets around the world to pick up the story. The public responded with more than a few raised eyebrows, and many questions. Is this even possible? Is their relationship now incestuous? Why would someone do such a thing?

Yes, adult adoption is possible, and is allowed in many states across the country, including Missouri, although a few states require some sort of previous familial relationship. The result of such adoptions is not a traditional parent-child relationship, but rather a legal relationship that creates the same rights and responsibilities as would the adoption of a child. Adopted adults also become heirs of the adopting parent, although some states restrict the extent to which they can inherit. (more…)

Wednesday, March 14, 2012

A recent article speculates that Whitney Houston’s estate will be worth anywhere between $10 and $20 million, or more. However, throughout her career, Houston has signed $100 million record deals and $10 million movie contracts for her roles in Blockbuster hits such as “The Bodyguard” and “The Preacher’s Wife.” Houston also completed the filming of “Sparkle” which is scheduled to be released in September of this year. Surely, with sound marketing, branding of Houston’s image, and increased record sales, her estate can bring in millions more in the upcoming years. Zach Greenburg, Forbes writer, said although Whitney Houston may not match Michael Jackson’s postmortem earnings, her artist royalties alone could bring the estate more than $10 million in the next year. Here’s an ABC News Article that discusses her estate’s earning potential in more depth.

On Wednesday March 7, 2012, the Fulton County Probate Court in Georgia approved Houston’s Will, signed in 1993. It revealed (more…)

Tuesday, December 13, 2011

Maybe it is all the time spent with friends and family, or the spirit of giving, or maybe it’s just all the mistletoe, but whatever the reason, the few months from Thanksgiving through Valentines Day always seem to be filled with engagements. As all of these happy couples begin to plan their weddings, and their lives together, many spend more time thinking about the band, picking out the perfect cake or looking for that perfect starter home than they do preparing for what may happen if things unravel down the road. Unfortunately, today the odds are not in favor of happily ever after.

Divorce is a difficult reality that many couples will eventually face. Entering into a prenuptial agreement before walking down the aisle can protect both parties should divorce become a reality. A prenuptial agreement is an agreement between the engaged couple to address how specific issues will be handled should the marriage end in divorce and on death. While these agreements may not be necessary for everyone, they are not just for the rich and famous!

Yes, they are important for the super wealthy, particularly important if one spouse brings substantially more wealth into the marriage; however, they may also be important for a host of other reasons. (more…)

Monday, November 28, 2011

The Penn State scandal has dominated media headlines in recent weeks.  While the vast majority of the coverage has been directed toward the alleged criminal acts and potential cover-ups, there has been a fair amount of buzz surrounding Joe Paterno’s July 2011 transfer of his entire interest in his home to his wife for $1.  Many have speculated that Joe Paterno had no legitimate reason to transfer sole ownership of the house to his wife, and that he must be trying to shield assets from potential civil litigation.  While I will not speculate as to Joe Paterno’s rationale for making such a transfer, I believe it is incorrect to take the position that there is no legitimate reason for doing so.  In many instances, spouses can reduce their potential estate tax burden by making inter-spousal transfers of assets.

The following is a simple example of how an inter-spousal transfer can accomplish a legitimate estate planning goal.  Currently, each individual may exempt $5 Million of his or her assets from estate tax at death.  Assume that husband has assets of $6 Million and wife has assets of $4 Million.  In this scenario, $1 Million of husband’s assets could be subject to estate tax upon his death.  On the other hand, wife would have $1 Million of unused estate tax exemption upon her death because she only has assets of $4 Million.  Therefore, it may make sense for husband to transfer $1 Million to wife, reducing his estate to $5 Million and increasing her estate to $5 Million.  This may help ensure that no estate tax would be due upon the death of either spouse.

It should be noted that recent legislation made possible the “portability” of estate tax exemption, which permits a surviving spouse to use his or her previously deceased spouse’s unused exemption.  While portability may mitigate the potential estate tax problem addressed in the example above, it may not always provide maximum estate tax advantages.  For example, if, in the example above, wife died first, she would have $1 Million of unused exemption.  Assume husband lives for another 10 years, and, during that time, his assets grew from $6 Million to $9 Million, a 50% increase. Thus, the $1 Million husband could have transferred to wife to maximize her exemption grew to $1.5 Million, yet husband may only use wife’s $1 Million unused exemption against that $1.5 Million, and that difference of $500,000 will be subject to estate tax.  If, on the other hand, husband had transferred $1 Million to wife, then all of the $500,000 gain in value of those assets would be exempt from estate tax (estate tax-exempt assets may grow, free of estate tax, after decedent’s death).  Failure to transfer $1 Million to wife during her lifetime effectively increased the amount of husband’s estate subject to estate tax by $500,000, and at the current 35% estate tax rate, increased his estate tax liability by approximately $175,000.  Therefore, ensuring that each spouse fully utilizes his or her estate tax exemption, if possible, is likely preferable to relying on portability.

Again, I do not want to speculate as to the rationale behind Joe Paterno’s transfer of his interest in his house to his wife, but, even with “portability”, there are legitimate estate planning reasons for making such an inter-spousal transfer.

Friday, August 12, 2011

(Please click here to see Part I of this series, entitled:  “Why Do I Need a Will?”)

If you divorce, you may need a Will (or an update to your existing Will) to prevent your ex-spouse from receiving assets at your death.

Here is a follow up to my post earlier this week.  In this recent article posted at AOL’s DailyFinance site, the author discusses the contents of Amy Winehouse’s U.K. Will.  The late Amy Winehouse had an ex-spouse, and the author mentions that English law may allow an ex-spouse to receive property bequeathed to him or her under their former (now deceased) spouse’s Will even if the divorce occurred after the Will’s execution.  This article implies that even if she had died without a Will at all, English law may look favorably upon an ex-spouse’s position and allow them to inherit.  Fortunately for Winehouse’s parents and brother, she had prepared a new Will post-divorce which effectively cut out the ex-husband in favor of them. (more…)

Thursday, August 4, 2011

When Christian Lopez caught Derek Jeter’s historic 3,000th hit on July 9, he most likely thought that he was just being a nice guy by giving it back to the Yankee shortstop. In that moment, Lopez probably didn’t realize that his incredibly selfless gesture could lead to potentially negative tax consequences.

Did Lopez give the ball to Jeter as a gift? That could mean that Lopez made a taxable gift equal to the fair market value of the ball. How much is that ball actually worth? Fair market value is defined as the price a willing buyer would pay a willing seller for the ball. You can buy an official Rawlings MLB baseball on for $17.30. Chump change. However, some people are estimating that Lopez could have sold Jeter’s ball for up to $250,000. Now we’re talking some serious money. (more…)