More Than Just Avoiding Taxes

By Lindsay Chin

Death and taxes may be inevitable facts of life, but the very wealthy often spend a lot of time and money trying to minimize the graveside combination of the two: the estate tax.

So great is the aversion of most wealthy people to that final tax — which can be as high as 45 percent — they employ legions of trust and estate lawyers to try to reduce it. But at a certain point, they end up paying a sizable chunk of their fortune in taxes. One simulation from J.P. Morgan Private Bank showed the tax bill on a $123 million estate, even with a basic level of planning, as $51.5 million. It is no wonder that trust and estate lawyers have such job security.

Still, for all the planning, there can be one significant glitch: mistakes. And sometimes the mistakes are not found until it’s too late. These errors can not only cost an estate tens of millions of dollars, they can also give the assets to the wrong person — like a former spouse.

“The aha! moment is not what the estate tax is — the math is simple,” said Janine Racanelli, managing director and head of the Advice Lab at J.P. Morgan Private Bank. “It’s when they see that number, they want to do something about it.”

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