Boston, MA (PRWEB) March 28, 2013
The world lost Ed Koch on February 1st, 2013; however, Mr. Koch who left only a 2007 will* to direct the distribution of his estate without the use an irrevocable trust such as the UltraTrust irrevocable trust has left much of his estate’s worth to the government in estate taxes and probate fees.
Mr. Koch desired in his will** to bequeath his estimated estate of $10 to $11 million* to his sister, Pat Thaler, her three sons whom he “adored,” his faithful serving secretary of almost 40 years, Mary Garrigan, and some to the LaGuardia and Wagner Educational Fund with the remainder to other family members.
Mr. Koch’s estate will** have to pay a New York state tax of 16% on every dollar over $1 million and a 40% federal tax on every dollar over $5.25 million. If it is assumed that his estate is worth $10 million, this would equate to $1.44 million in NY state estate tax and $1.90 million in federal taxes.
“That is a lot of money in taxes which could have been easily avoided,” exclaims Rocco Beatrice, Managing Director of Estate Street Partners, LLC.
Mr. Koch was many things: a soldier, a New York City Councilman, a congressman, a TV personality, a movie reviewer, and, as he was best known as, the former mayor of New York City. He was also commended for uplifting New York out of the economic struggles of the 1970’s during his term.
In addition, Mr. Koch was a lawyer and managed his finances well by investing astutely. Irrespective of all this and his “net worth”, he was a hero to his family and fans.
“He was such an accomplished, well rounded bachelor and a man of great Jewish faith. But I find it so surprising, himself being an attorney, that Mr. Koch did not manage his estate plan with the same veracity. I believe he could have done a much better job of avoiding the massive amount of taxes his estate will eventually have to pay,” laments Mr. Beatrice.
“I’m saddened by this because much more of his estate could have gone to his family especially to his three beloved nephews, Jared, 49, Jonathan, 52, and Shmuel, 54.”
From preliminary reports of the probate court, Mr. Koch’s will was insufficient to have protected his assets from probate and the estate taxes. Apparently, no use of any trust, revocable or irrevocable trust was implemented in his estate plan.
“For someone of that kind of wealth and charitable causes, a well-drafted irrevocable trust would have managed his estate much better,” explains Mr. Beatrice.
In his will**, which was publicly available March 18th, Mr. Koch left $500,000 to his sister, Pat, $100,000 to his secretary, Mary, $150,000 to his sister-in-law and her two children, and $100,000 to set up the LaGuardia and Wagner Educational Fund to promote public and government service.
Additionally, according to the court documents, the will* also apportioned $150,000 to Mr. Koch’s older brother, Harold, who is now passed away. But Harold’s survivors will partake in this allotment. $50,000 goes to Harold’s widow, Gail Koch and $500,000 to Joey Koch, their daughter. The last $50,000 is left to Andrew Koch, Harold’s son by his first marriage.
The rest of the estate goes to his sister’s three sons in equal shares.
“Although the will sounds like it covers all the bases, if falls woefully short in several areas. Mr. Koch could have accomplished the same thing with significant savings and privacy using irrevocable trusts. His will does nothing to protect these assets or avoid probate and does absolutely nothing to avoid state and federal estate taxes,” critiques Mr. Beatrice.
“A will is good for naming the guardians of your children, but not much else.”
“If Mr. Koch would have placed his businesses in an irrevocable trust, then only the original value of the business would count towards a gift tax. If the business was out of the estate, when Mr. Koch died, there would be no estate tax. Additionally, Mr. Koch could have started gifting away $14,000 per year to a person or to what is known as a Crummey Trust.”
“There are many types of irrevocable trusts that accomplish many different things and a person taking advantage of irrevocable trusts needs to have a team that thoroughly understands the legal and tax ramifications,” extols Mr. Beatrice.
“Not only would these irrevocable trusts have saved on taxes, but they also serve as an asset protection tool from many different types of lawsuits - especially contingent-based, frivolous cases. When Mr. Koch gives the money to his sister’s children, it is theirs and theirs alone.”
“One of the best ways to protect your assets, ironically, is to not own them directly.”
Perhaps Mr. Koch wished to keep things simple, although probate court is never a simple process.
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** - scribd.com/doc/129748713/Former-NYC-Mayor-Ed-Koch-s-will - Ed Koch’s will