People in Hollywood and across the country were shocked and saddened by the sudden passing of one of the world’s most talented and prolific actors. Philip Seymour Hoffman’s untimely death brought national attention to the spreading epidemic of heroin addiction, but there are many other lessons to be learned from his death.
From an estate planning perspective, there are many legal mistakes that Hoffman made that left him open to massive and unnecessary taxation. Money that could have provided his non-married partner and the children for the rest of their lives may practically disappear into government coffers, to the tune of up to 40 percent of his total estate.
The one simple asset protection measure Hoffman could have done is marry his partner, Mimi O’Donnell. Spouses are able to transfer an unlimited amount of wealth between each other without any tax penalty, but, since O’Donnell and Hoffman were never married, she will be subject to the same level of estate tax as anyone else would have been. She was the recipient of some $35 million according to the instructions of Hoffman’s most recent will, but an estimated $12 million of that substantial estate may vanish due to taxation.
Another issue Hoffman neglected to address was that his will wasn’t up to date. His last will was executed in 2004, when he had only one child. His will established a trust for his son, but Hoffman never amended his will to provide for his later-born children, who were not specifically provided for at the time of his death. Any time a person hits a major life milestone such as a death in the family, marriage, divorce or the birth of a child, they should immediately consult an experienced estates and trusts attorney about updating their will to reflect their new circumstances.
Source: Daily Finance “Philip Seymour Hoffman’s 3 Biggest Estate Planning Mistakes,” Dan Caplinger, Feb. 25, 2014