The recent death of 46 year-old Philip Seymour Hoffman was a loss felt by the entertainment industry and the talented actor's large fan base. What might make Hoffman's death even more tragic is the family he leaves behind, including his three young children and their mother, Mimi O'Donnell.
The actor, who died from a drug overdose, left behind an estate estimated at $35 million. A recent article in Daily Finance reveals that there are several issues with the estate that could prove costly for his heirs – and that could have been easily avoided.
When Hoffman died, he did leave a will. However, that Philip Seymour Hoffman’s will was drawn up in 2004. At the time it was written, he and his partner had one child together, a son. The will left part of the estate to his son, in the form of a trust, and the rest to O'Donnell. In the decade that passed, Hoffman never updated his will. The couple had two more children together but nothing in the will has been changed to reflect that. Neither one of the girls are mentioned in the will.
It's important to update your estate plan whenever a major life event occurs, such as a birth of a child, a wedding, divorce or a death. Otherwise the legal battles that can ensue between heirs can be very costly, both financially and emotionally.
Another issue could cause the estate to take a heavy hit in taxes. Although Hoffman and O'Donnell had been in a relationship for a long time, they never married. Therefore, the funds left to O'Donnell won't qualify for the unlimited marital deduction. This deduction allows one spouse to leave the other spouse an unlimited amount of financial assets without the surviving spouse having to pay estate tax on those assets. Because Hoffman and O'Donnell never married, O'Donnell will have to pay an estate tax of 40 percent of what she inherits. Had the two married, approximately $12 million would be going to O'Donnell instead of the IRS.
These oversights in estate planning that Hoffman made are also ones can affect much smaller estates. It's important to make sure your estate planning is up-to-date and drawn up in the best interest of your heirs, whether your estate is worth $35 million or $3500. Contact a qualified Wheaton estate planning attorney to discuss how you can secure your family's future.