The estate of recently deceased actor Philip Seymour Hoffman provides us with some important lessons—the importance of establishing solid wills and trusts and the importance of updating your estate planning documents. Following Hoffman's death from what is believed to have been a drug overdose, the actor left behind an estate valuing $35 million, which he left mostly to Marianne O'Donnell, his long-time girlfriend who is the mother of his three children. His estate included a trust for his son. CNBC's Today.com has brought light to various mistakes the actor made in his estate planning arrangements, including his failure to update his will, which he created a decade ago. Here is an overview of the various estate planning issues, according to Today.com:
Excessive Estate Taxes: Due to the fact that Hoffman and O'Donnell never got married and the fact that common law unions are not recognized in New York, O'Donnell is expected to be hit hard by estate taxes. One estate planning expert estimated that the total tax bill would be $11.9 million for the full $35 million estate, while another expert estimated a bill of $15 million. It is said that in addition to the option of lowering taxation through marriage, Hoffman also had the option of creating additional trusts that would have lowered the total estate tax bill.
Outdated Will: O'Donnell created his will in 2004, when he only had one child. The will established a trust for his son, which the son is set to fully inherit at the age of 30. Because the will is a decade old and was not properly updated, it appears that no trusts were established for Hoffman's two younger daughters. Fortunately, there is a New York law that provides certain protections for children who were born after a will was created and who were not given equal treatment in that will. The law allows the amount of money left for the child who was mentioned to be divided between all of the siblings.
Poor Structuring of the Trust: Another trust-related issue that was mentioned was the fact that Hoffman's son was set to fully inherit the trust assets at a fixed age. It was noted that it is usually more effective to maintain the asset protection provided by the trust and instead set an age at which the child can designate a trustee. This is due to the fact that assets under a trust receive all kinds of protection, such as protection from ex-spouses, creditors and estate taxes.
Whether you are a celebrity who is leaving behind millions of dollars in assets or you are an everyday person who will have a more limited estate, it is vital that you keep your will up-to-date to reflect important changes in your life. You may need to update your will if you remarry, get divorced, have more children or have a dramatic change in your property or asset ownership. You should also make sure to work with a knowledgeable estate planning attorney who can help you establish the right kinds of protections for your assets. Our New York estate litigation lawyers at Novick & Associates, P.C. can provide you with this type of guidance. Contact our firm so we can assist you with your estate planning needs!