When three-term mayor of New York City Edward Koch died on February 1, he died a very wealthy man. Koch’s estate is estimated to be worth between $10 and $11 million dollars. As a recent article explains, nearly one-quarter of Koch’s estate will go to Uncle Sam.
Koch did not accumulate the majority of his wealth until after he left office in 1989. His net worth in 1978 was $106,890.38. After his three-term stint as mayor, however, he was affiliated with a law firm, and worked as an author, radio host, and was a judge on popular television show, “The People’s Court.” Koch lived below his means, and was therefore able to amass substantial assets by the time of his death.
Under current federal law, a person may only pass $5.25 million, tax free, to their heirs. There is a tax of 40% on any amount exceeding the initial $5.25 million. Moreover, New York State only has an exemption amount of $1 million. The top tax rate in New York State is 16%.
There are several things that Koch could have done to reduce his estate tax bill. One tool he could have used is referred to as a “deathbed gift.” A person may give another person $14,000 per year. This amount does not count towards the $5.25 million exemption amount. Had Koch gifted that amount to his nine named beneficiaries before his death, he would have been able to pass an additional $126,000.
For information on how to reduce your estate tax bill, speak with an estate planning attorney today.
