The former mayor of the city of New York Ed Koch died on February 1st at the age of 88. He actually served three terms as the mayor of the city after serving as a member of the United States House of Representatives.
More often than not you can learn something about estate planning when you examine the estates of famous individuals who passed away. In the case of Ed Koch you see how your financial legacy can be ravaged by estate taxes.
The federal estate tax is obviously applicable in all 50 states. The current federal estate tax exclusion is $5.25 million, and the maximum rate is 40%.
Some states have an estate tax on the state level, and in fact we have a state estate tax right here in Connecticut.
There is an estate tax in New York as well, and the 2013 exclusion amount is $1 million; the maximum rate is 16%.
People who are in politics are often referred to as “public servants.” As mayor the highest annual salary that Koch earned was $130,000. Though that may sound high to some, it is very likely that Koch could have earned more in the private sector.
In fact, he did indeed amass quite a bit of wealth after retiring from his political career. The value of his estate is estimated to be somewhere between $10 million and $11 million.
According to an article appearing on the Forbes website, the inheritances that will be received by his heirs are going to be reduced by over $2.5 million due to tax bills that will be presented by the state of New York as well as the Internal Revenue Service.
It may have been possible for Koch to plan his estate in a manner that would have eased this tax burden. If you are in possession of assets that exceed the exclusion amount you would certainly do well to discuss tax efficiency strategies with an experienced estate planning lawyer.