Philip Seymour Hoffman’s $12 Million Estate Planning Mistake
March 16, 2014
Earlier this month, the entertainment industry was stunned by the news of the tragic and untimely passing of actor, Philip Seymour Hoffman. Famous for his on-screen acting roles, as well as his successful theater and directing abilities, he will also be known by those close to him for one unfortunate, and avoidable, reason: his estate planning mistakes.
Hoffman executed his will 10 years ago, and has since grown his estate to the value of $35 million. At the time of his death, he left a significant portion of his estate to his oldest child, Cooper, and the rest to his longtime partner Mimi O’Donnell, the mother of Cooper and the couple’s other two children. Unfortunately, due to how his estate planning was done, the amount of federal and state taxes on his estate could very well be 40% of its entire value.
Even though a $35 million estate is well beyond the reach of the average individual, there are lessons to be learned from Philip Seymour Hoffman’s estate planning (or lack thereof) that can be applied by everyone.
Marriage Can Save Your Loved Ones Big-Time
Marital status is arguably the most expensive mistake that large estate holders can make. If a couple is not married at the time of one’s death, the estate (minus small tax exemptions) is susceptible to a 40% tax rate. For example, if Hoffman had been married to O’Donnell, $12 million less would have ended up in the hands of the IRS and would have been available for Hoffman’s loved ones.
In addition, estate planning is much simpler for married couples. In general, states allow spouses to receive most of the estate even if there is no will. If a couple is not married, though, the majority if not all of the estate will pass to an individual’s children or parents, which could leave a long-time significant other, such as O’Donnell, with no financial support.
It goes without saying that there is much more than finances to consider when it comes to deciding to marry, but it is important to realize that it is one definite way to ensure future financial security for loved ones.