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The death of actor Philip Seymour Hoffman is truly a great loss to the entertainment world, and a tragedy for the talented actor’s family and friends.
Like the sudden and tragic death of actor James Gandolfini, estate planning lessons can be learned by Hoffman’s premature passing.
The 46-year-old actor executed his Last Will and Testament in 2004, with a trust providing for his oldest child and leaving the rest of his estimated $35-million estate to his longtime partner and mother of his children, Mimi O’Donnell. Despite having these documents in place, 10-years-later, his estate is subject to federal and state estate taxes, which could amount to more than 40% of Hoffman’s overall net worth.
These are some of the lessons to be learned:
- Keep your Estate Plan Up to Date – Hoffman had a son at the time he signed his will in 2004, but later had two daughters. Since he did not update his estate plan to specifically mention his daughters, it is unclear whether all three of his children will be treated equally.
- Marital deduction can reduce or eliminate estate taxes – Hoffman and O’Donnell’s decision not to marry was a personal one that should not be judged. However, if the couple were married at the time of Hoffman’s death, the assets left to O’Donnell in his will would have qualified for the unlimited marital deduction under the tax laws. This could have resulted in a significant estate tax savings. Although Hoffman will get the benefit of a $5.34 million federal estate-tax exemption (the exemption amount for 2014), the remainder of his approximately $30-million estate will be subject to tax rates of about 40 percent.
- Trusts may avoid personal information becoming public record – When a will is admitted to probate it becomes public record. Having your assets held in a revocable trust avoids having details of your estate plan released to the general public. Since the majority of Hoffman’s estate plan is contained in his will and not in trusts, the details of his estate plan are now public record.
- Minor children need guardians – Hoffman was survived by three minor children at his death, but only one was provided for in his will. Making sure that there is a guardian and a backup guardian, and that any inheritance that a child receives is properly managed are key components of any estate plan.
There are many reasons why we avoid creating an estate plan. For some, it’s not pleasant to think about one’s own demise, it may be difficult to find the time and resources, or we may not know how to create an estate plan. However, no one knows what tomorrow will bring, so it is important to plan for the unthinkable.
For a free guide on Estate Tax Planning, click here.
By Eric J. Einhart – Guest Blogger