Estate Planning Mistakes to Avoid
Oscar-winning actor Philip Seymour Hoffman’s tragic death offers a lesson in estate planning mistakes to avoid. He left an estate reportedly worth $35 million to the mother of his three children, but due to improper planning, she is likely to face a multimillion-dollar tax bill, according to estate-planning experts who reviewed the will.
Hoffman’s will was reportedly drawn up in October 2004 when he only had one son, prior to the births of his two daughters. The will provides for that child, but because it was never updated, it does not account for his two daughters.
Hoffman left the estate directly to his partner instead of setting up a trust, meaning that the estate will get taxed now and then again at her death. Setting up a trust would have protected the estate from creditors and passed the assets on to the descendants after the survivor’s death.
Since Hoffman and his partner were not married, she does not get any of the estate tax breaks that are available to spouses. The marital deduction would allow someone to give an unlimited amount to their spouse, during life or through your estate plan, provided he or she is a U.S. citizen, with no federal or state tax applied.
Consulting a tax professional could have saved a great deal of money and grief, and could have avoided many of these issues. Estate plans and wills should be reviewed annually and updated to reflect changes that may occur. Contact a partner if you would like to review.