The Skinny on James Gandolfini's Problem Will

The Skinny on James Gandolfini's Problem Will

Family, friends and fans of James Gandolfini—best known for his TV role as mob boss Tony Soprano—were shocked when the actor passed away suddenly at age 51. And as the details of his will have become public, there's been even more cause for surprise.

According to The New York Times, the famous actor's estate was apparently so poorly planned that his heirs could be forced to fight complex legal battles tied to his assets.

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The Impact on His Children

“The assumptions that many people are making are totally incorrect,” Gandolfini’s lawyer, Roger S. Haber, told The New York Times. “Everyone in his life was taken care of.” 

But the lack of detail in the actor's relatively brief will may present problems for his two children. For one, there's speculation that a gift-tax provision that was about to expire pressured Gandolfini to hastily sign off on the will in December 2012, while trying to ensure that his second wife and then 2-month-old daughter would be provided for.

But the money designated for his daughter wasn't put into a trust, which gives her full discretion to spend it when she turns 21. More importantly, the money lacks the safeguard from creditors that a trust could have provided. 

But there was one very smart move that the actor made: Thanks to a life insurance policy that Gandolfini set up in 2002, his son will receive a $7 million payout. That money is in an insurance trust, and it can't be taxed with the rest of the estate.

RELATED: Life and Disability Insurance 101: What You Need to Know 

Questions Swirl Over the Actor's Tax Strategy

Rumor has it that the Gandolfini estate is worth over $70 million—and could be subject to a staggering $30 million in taxes due to poor planning. While both figures are likely huge overestimates, there are still lessons to be learned about the need to properly navigate tax law when it comes to estates.

If Gandolfini had named his wife as sole heir, his estate could have avoided federal taxes. But the actor chose a more complicated way to split his assets, allocating fixed amounts of money to friends totaling $1.6 million, and then dividing the remaining assets among his sisters, wife and daughter by percentage. Marital deduction applies to his wife's portion, which will be tax-free, but lawyers will need to address the complicated implications for how the remaining shares will be taxed.

Allocating assets by percentage presents other problems, Keith Brandt, a Washington Wealth Management adviser, told The New York Times. “Situations change and 50% of the assets becomes 100% of the assets.” In Gandolfini's case, the amounts divvied by percentage could have changed if his worth had grown or shrunk significantly since his will was drafted.

RELATED: Wills and Trusts 101

Why His Real Estate Assets Could Take a Hit

Real estate proved to be an especially weak spot in Gandolfini's estate planning, due mostly to oversight about foreign laws.

Gandolfini intended for his house in Italy to be given to his son and daughter, and they were to receive equal ownership once his daughter turned 25. But the provision in his will conflicts with Italian law, which mandates that children receive 50% and a wife 25% of a property, leaving only the remaining 25% for the owner to choose how to appropriate. Adding insult to injury, Gandolfini did not lay out a strategy for the house's upkeep, leaving the burden on his beneficiaries.

Gandolfini also gave his son the right of first refusal to buy his $3.5 million Manhattan apartment at fair market value, leaving the 13-year-old with a weighty financial decision.

There's another important lesson to be gleaned from Gandolfini's will: His financial matters could have been kept out of the limelight had he chosen to set up a revocable trust, which is the usual route taken by prominent figures. In a so-called "pour-over will," all of the assets automatically filter into a trust—and stay private. With any luck, the issues with the Gandolfini estate will go to sleep with the fishes.

RELATED: What We Can Learn From Celebrities About Money 

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