BROOKLYN, NEW YORK, MARCH 15, 2013. Sadly, we shall not find the former mayor of New York City eating lunch at Aquagrill, a favorite Soho eatery. The will of former Mayor Ed Koch was filed this past Monday in Surrogate’s Court in Manhattan. Mr. Koch, who died on Feb. 1 at the age of 88 from congenital heart failure, served as New York City mayor between 1978 and 1989. His estate is said to be valued between $10 million and $11 million. Mr. Koch’s post-mayoral earnings came from his law practice, books, speaking engagements, published commentaries and television commercials.
The former mayor left sizeable amounts to both family and friends, as well as to a charity that he cared for dearly. Specifically, he left $100,000 to Ms. Mary Garrigan, his longtime secretary, whom he first hired to work in his Washington, D.C. congressional office in 1975. He also left $100,000 to the LaGuardia and Wagner Educational Fund at the City University of New York, which will be used to create a program for public and government service.
However, the majority of Mr. Koch’s estate was left to his family. He gave $50,000 each to his sister-in-law, his nephew and his niece. He also left $500,000 jointly to his sister and brother-in-law. The remainder of Mr. Koch’s estate, after funeral expenses and lawyers’ fees, will be shared equally between his sister’s three sons. It is said that the former mayor’s estate shall be subject to $1.45 million in federal estate tax and $1.1 million in New York state estate tax, presuming that the estate is valued at $10.5 million.
Hizzoner could have made certain estate planning choices to protect his estate from creditors, to keep his financial matters private and to minimize his estate from exposure to estate tax. For example, if Mr. Koch had set up lifetime trusts to his nephews, such trusts could have protected them from creditors or divorcing spouses, if any. In addition, creating such trusts could have had the benefit to some degree of secrecy, as trusts are not public documents like wills entered for probate.
Mr. Koch could have minimized his estate from federal and New York State estate tax exposure by making annual gifts to his beneficiaries, as well. The federal tax code currently provides that, generally, grantors who make gifts over $14,000 to individuals during a given year must pay a gift tax. Thus, Mr. Koch could have made an annual $14,000 gift to each of the beneficiaries named in his will and would have not incurred a gift tax. Although there is currently no New York state gift tax, making such gifts would have also minimized his taxable estate for New York state estate tax purposes. Finally, the federal tax code provides that the Mayor could have made up to $5.25 million in lifetime gifts without having to pay a gift tax. Thus, Mr. Koch could have made large deathbed gifts free of federal estate tax. Said gifts would have also minimized his taxable estate for New York State estate tax purposes.
Nevertheless, in making an estate plan, one should balance tax considerations with one’s understanding of family dynamics, the cost of administering an estate and one’s long term goals and priorities. Thus, each estate plan should be created for each individual. Choosing an attorney who understands this is challenging, yet critical. However, doing so may leave loved ones happier, wealthier and with less stress.
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