The entertainment world was heartbroken by the recent tragic death of actor Philip Seymour Hoffman, one of Rochester’s own. He was 46 years old, and he left behind his longtime partner and their three children. While he left behind an indelible legacy in Hollywood, his estate planning did not win many standing ovations in the financial industry. Hoffman’s will is riddled with many loose ends that may cost his heirs much of their estate. Sadly, many of these problems could have been prevented with the right legal and financial guidance.
Marital status can pose problems for many estates. Since Hoffman did not marry his partner of many years, she will not be protected by the unlimited marital deduction provision in estate tax laws. Despite Hoffman’s estate qualifying for a $5.34 million estate tax exemption, the remainder — nearly $30 million — will be subject to a 40 percent tax rate. While people may have valid personal reasons for not marrying, not everyone is aware of the financial impact of this decision. Legal marriage would have saved Hoffman’s heirs $12 million, which now is in the hands of the Internal Revenue Service. In addition, New York State has yet to claim its share of his fortune.
Another common mistake is failing to regularly review and update estate plans. At the time Hoffman created his will, he had one son and made provisions for him. After he later had two daughters, he failed to update his will. While they may be protected by estate laws that account for these situations, this is not guaranteed. It’s important to update a will after every major life event.
In addition, Hoffman could have protected his family’s privacy by more extensively utilizing trusts. While not everyone has the public stature of Hoffman, everyone can benefit from keeping his or her family finances from being broadcast publicly. Probate documents are public records, and trusts ensure a safe and discreet transfer of assets.
Estate planning is not a one-time process. As time passes, lives and situations change. Accordingly, our estate planning attorneys can best help us to plan a secure future for our loved ones when they aren’t relegated to a cameo appearance in our lives. A Rochester area estate attorney can provide periodic guidance and will revisions after major life events like marriage, divorce, new children and asset changes.
Source: Daily Finance, “Philip Seymour Hoffman’s 3 Biggest Estate Planning Mistakes” Dan Caplinger, Feb. 25, 2014