One important purpose of estate planning is to ensure that as many assets as possible pass on to friends, families, and charities–instead of Uncle Sam. Using trusts and other legal arrangements to structure an inheritance is a prudent move for all New York families, but particularly those with sizeable assets. Taxes at both the state and federal level can take a significant chunk out of any inheritance. There are many high-profile cases of individual who failed to take advantage of all the planning tools at their disposal, resulting in an inflated tax bill. The estate of actor James Gandolfini’s, settled in New York, is just one recent example of how millions can be lost to taxes.
Illegally Cutting Corners
Unfortunately, some families may be tempted to cut corners and resort to illegal conduct in order to prevent the government from collecting on a large tax bill. The temptation to act in this manner is even higher when prudent estate planning is not conducted at the outset.
It is critical to reiterate the severe consequences of skirting the law in order to evade inheritance taxes.
Recently, Bloomberg News shared one cautionary tale involving the family of successful New York businessman, Harry G.A. Seggerman. Mr. Seggerman died in 2001 leaving behind an estate valued at nearly $24 million to his family. According to reports, a large portion of the assets were held in undeclared Swiss bank accounts. In addition, federal prosecutors allege that the family engage in illegal activities to defraud the federal government of its tax obligation.
The details of the case are quite complex, but at least four family members and an advisor were all charged with various federal crimes, including conspiracy and tax evasion. Apparently, they used different means, like sham mortgage services, to hide assets and ultimately not pay their full tax obligation.
The family members have pleaded guilty and are apparently cooperating with prosecutors in their efforts against the advisor (who pled not guilty). However, the family members still face stiff penalties (and possible jail time) for their conduct.
Smart & Legal
The bottom line: be sure to to receive the advice of experienced professionals when dealing with these matters to ensure that you are taking advantage of all legal tools to save on taxes. The law has built in various avenues to help families make prudent steps that allow more assets to go to desired beneficiaries. One need only take the steps ahead of time to make it happen.