Philip Seymour Hoffman’s Death Provides Estate Planning Lessons
The death of Philip Seymour Hoffman has focused attention on the heroin epidemic, his death can also provide estate planning lessons for families without one. In addition to three children born of his longtime companion, Marianne O’Donnell, Hoffman also left a sizable estate worth approximately $35 million.
Even though most of us will not amass that level of wealth, it is not impossible for a small business owner or professional who is a prudent investor to have a net worth that approaches $5 million. More importantly, most married couples will have children that they will want to protect in the event of an untimely death.
Estate Planning Lessons
A review of Hoffman’s Last Will and Testament reveals that his attorney did not do him any tax favors. First, because Hoffman did not shelter any of his wealth, he will be paying approximately $11.46 million in Estate taxes. The Estate Tax – also known as the death tax – taxes property you own at the time of your death. This includes cash, securities, real estate, annuities, and insurance.
In 2014, the first $5.34 million is exempt from the Estate Tax; however, the IRS will impose a 40% tax on all property that exceeds that amount. Because you can give an unlimited amount of money to your spouse throughout life or as part of an estate plan, if Hoffman had married O’Donnell his estate could have passed directly to her without the requirement to pay any such taxes. However, because O’Donnell was simply his “companion”, no such tax breaks are available.
Hoffman’s Will also only makes reference to his oldest son, Cooper. Excluding his daughters, Tallulah and Willa, who were born after the Will was executed. In fact, it does not contemplate any children that he may have later. Typically, Wills disperse assets equally for children specifically named in it and children born after the Will is drafted. Hoffman’s Will contains no such language. Because of this, it’s possible the children will receive varying amounts depending on whether Hoffman made O’Connell or his children as beneficiaries of his accounts.
Avoid These Mistakes!
Hoffman could have avoided this mess with a marriage status and a well-drafted estate plan. In the end, whether you’re a celebrity or average Joe, it’s imperative to plan for the unexpected. You can protect your family and assets by being proactive.