Philip Seymour Hoffman’s unexpected death at the age of 46 shocked the country and garnered headlines for weeks.
Now that the dust has begun to settle, details of Hoffman’s estate plan have started to emerge. Though Hoffman thankfully had the foresight to create a basic estate plan to ensure that his loved ones were cared for, his case highlights some clear mistakes that others should work hard to avoid.
According to records that have recently been released, Hoffman executed a will back in 2004 and included a small trust to care for his oldest, and then only, child. The actor’s estate is estimated to be around $35 million today and it was left to his longtime partner and mother of his children, Mimi O’Donnell.
Though it’s great that Hoffman took the steps that he did, experts have pointed out that several mistakes led to problems that never needed to occur and will end up costing Hoffman’s heirs millions of dollars more than they ever needed to pay. Let’s discuss some of the biggest lessons from Hoffman’s estate.
Marriage saves money
In Hoffman’s case, he left the vast majority of his assets to his longtime partner O’Donnell. Though it was good to officially include her in the will, by not marrying, the estate will now pay vastly higher taxes than it would have had the two gotten hitched. The reason is that unmarried couples do not have the benefit of the federal unlimited marital deduction.
As it stands, Hoffman’s estate will receive only the standard $5.34 million estate tax exemption and the remainder will be taxed at a whopping 40 percent. Had the two been married, the unlimited marital deduction would have resulted in O’Donnell and her children walking away with around $12 million more in their pockets, a sizable sum for any family.
Though the issue doesn’t mean everyone needs to be married, that’s a complicated matter with many other factors to consider, it does mean that you should be aware just how much the decision to stay untethered could end up costing your family.
Update your plans often
A common mistake highlighted by Hoffman’s case is the failure to update estate plans after a major life event. Hoffman drafted his will back in 2004 and appears never to have thought about it since. The problem is that when the will was written, Hoffman had one son. Today, Hoffman has two additional daughters that were never specifically mentioned in the will or provided for in a trust. Though it doesn’t mean his daughters will now be left penniless, it does mean that O’Donnell and the executor of his estate will have to work harder than necessary to ensure all children end up with an equal share of the estate.
When major life events happen, births, deaths or divorces, it’s important to take a look at your existing estate plan and make sure that there’s nothing you feel should be changed to reflect new realities.
Privacy is paramount
The only reason we know all that we do about Hoffman’s estate plan is because he chose to draft a will to handle the majority of his estate. Wills are public documents that become part of the public record when filed with probate courts. That means that strangers have the ability to read through intimate financial details of your life, something many people may find off-putting. Had Hoffman made more extensive use of trusts, he could easily have avoided having details of his estate revealed to the public.
Though it may be confusing, creating an effective estate plan does not have to be an overly complicated process. An experienced Minnesota estate planning lawyer can help walk you through the process of establishing or updating a will or trust. For more information on estate planning in Minnesota, along with a variety of other topics, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.
Source: “Philip Seymour Hoffman’s 3 Biggest Estate Planning Mistakes,” by Dan Caplinger, published at DailyFinance.com.
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There are important things that people should know about estate planning. It is a very important aspect that helps in managing finances and dealing with life’s uncertainties effectively.