We have all seen the story about the death of James Gandolfini recently. There have been a lot of questions about why he planned his estate the way he did. Why did he not take advantage of different tax planning strategies that would have minimized the estate’s tax burden? Why did he not plan better for the bequests he left for his sisters? But the hardest thing to understand about Mr. Gandolfini’s estate planning is why he chose to use a Will as his sole estate planning vehicle?
Gandolfini’s spouse received hardly anything from his estate. In fact, most of his estate went to his children. Had he planned properly he could have left his estate to his wife in a QTIP trust, avoiding estate taxes on his death. When his spouse died, the assets could then have passed to his children. The downside to using the QTIP trust is that it would have tied up his children’s inheritance for years until the spouse died. Gandolfini may have also provided for his spouse in other ways. We don’t know what happened in this regard.
Gandolfini left significant bequests to his sisters. If he had left those sums to them in trusts for life, any amounts left at their death could have escaped estate taxation. The sums could have been left in trusts providing for “ascertainable standard” distributions to the sisters and then they could have been their own trustees without causing estate tax inclusion. (An “ascertainable standard,” such as health, education, maintenance, and support is extremely flexible.) This certainly is what I would have suggested. However, even if this had been explained to him, Gandolfini may have wanted the assets to go to his sisters outright, for whatever reason.
But, the hardest choice to understand is Gandolfini’s choice to use a Will rather than a trust as his primary estate planning vehicle. By using a Will, he subjected his estate to the process of probate. Probate delays and expense vary by jurisdiction. But, in all jurisdictions, probate is a public proceeding. It is difficult to understand why he would choose to air his finances and personal choices in public. It is even more difficult to understand why he would expose his family to this. If he had used a trust rather than a Will, we would not know to whom he had left his fortune. Also, his estate will be paying millions of dollars in taxes and fees, much of which could have been avoided with proper estate planning.