Legal officials, such as probate judges, process a decedent's will through probate. While state probate…
When actor Philip Seymour Hoffman died unexpectedly this past February, he hadn’t updated his will in about 10 years, and his estate planning left something to be desired.
Hoffman’s will created a trust for his son Cooper, and left the rest of his roughly $35 million fortune to his longtime companion Mimi O’Donnell.
It’s worth taking a look at what Hoffman might have done differently:
• First of all, apart from the trust for his son, everything passed through probate, which tied up the assets and caused the estate distribution to be made public (which is how we know these details). If Hoffman had used additional trusts, the world wouldn’t know the extent of his wealth or how he planned to distribute it.
• Second, Hoffman never updated his will after his other two children were born. So while Cooper will benefit from a trust, Hoffman’s other children will get nothing. Presumably, O’Donnell (the mother of all three children) will take care of them. But if O’Donnell remarries and becomes part of another family, she could eventually leave a big chunk of Hoffman’s wealth to complete strangers rather than to his own children. Hoffman could have largely avoided this prospect through the use of trusts.
• Third, although Hoffman and O’Donnell were a couple for 14 years and had three children together, they never formally married. As a result, his estate will probably have to pay about $15 million in federal and state taxes – whereas if the couple had tied the knot at some point, the entire estate would probably have been tax-free.
Of course, the decision to marry is complex and involves many considerations other than estate taxes. Still, one has to wonder whether Hoffman might have felt differently about marriage if he had known that remaining legally single would be so costly to his partner and his children. It’s also worth noting that even if Hoffman had still wanted to remain single, he might have been able to use other techniques to reduce the tax burden for his heirs.