Lessons from James Gandolfini’s Estate Tax Planning Mistake

I’m sure James Gandolfini had good intentions when he updated his estate plan in December 2012, months after the birth of his daughter. But good intentions sometimes result in costly consequences, and this is no exception.

Thanks to poor estate tax planning, a sizable portion of Gandolfini’s estate will go to an unintended beneficiary – the IRS.

With an estate valued at approximately $70 million, Gandolfini generously provided millions of dollars to relatives and friends in his will. Unfortunately the Sopranos star did not implement some common estate planning strategies, like taking advantage of an unlimited deduction for gifts made to his surviving spouse. Not taking advantage of estate planning strategies was a mistake that may ultimately cost his estate $30 million in estate taxes.

Gandolfini’s will left about 80 percent of his estate subject to estate taxes with rates that will amount to 55 percent when considering federal and New York State estate portions.

Since the tax bill will need to be paid within nine months, it is likely that Gandolfini’s family will have to start liquidating the assets of the estate. Unfortunately this is yet another unintended consequence of poor estate tax planning.

On one hand, I applaud the effort Gandolfini made to keep his estate plan updated in order to ensure his wishes were honored. Since I did not represent him, I do not know what discussions were had regarding estate taxes; but clearly it is unfortunate that his estate plan neglected the significant tax consequences.