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Tax battle under way over size of Astor estate

When it comes to estates and taxes, size matters. And competing claims about size can result in major court battles. New Jersey attorneys with a focus on trusts and wills know this. It's that knowledge that guides strategies on how to protect assets from the tax collector.

It doesn't matter whether an estate is large or small. The objective is to ensure that as much of that wealth goes to fulfill the wishes of the person to whom it belonged after they have died. But when an estate is huge, disputes over its exact size become matters of big money and can spark battles royal with the Internal Revenue Service.

That's just what is happening now with the estate of Brooke Astor, the late widow of Vincent Astor, who was an heir of the legendary fur and lumber mogul, John Jacob Astor. She died four years ago at the age of 105.

According to court papers in seven suits filed recently by executors, the IRS has pegged the value of the estate at $223 million. And the IRS is claiming the federal bite of that estate should be $97 million. But the executors say the Brooke Astor's fortune is only $93 million, which shrinks the amount due in taxes to $35 million.

Complicating matters is the fact that in the months ahead of her death, accusations were made that Astor's son by another marriage had coerced her, and possibly resorted to forgery, to change her will and reduce amounts that were earmarked for some charities. At the time, an estimate of Astor's wealth was given as $131 million.

In light of all the claims, it's hard to know just what the value of the estate really is.

The IRS says its case rests on a finding that about $96 million that the estate claimed as charitable donations are not eligible for the deduction. The agency says it has identified another $20 million that Astor gifted away during her life that should be subject to taxes. The IRS is also seeking $2 million in penalties because the estate didn't file proper returns.

The lesson to take away is that it is possible, through proper estate planning, to avoid these kinds of hassles.

Source: Forbes.com, "Brooke Astor Estate Now Faces $62 Million Attack By IRS," William P. Barrett, Dec. 7, 2011

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