Potential Tax Hit of Philip Seymour Hoffman's Estate

Philip Seymour Hoffman's will, will, estate plan, update your estate plan, Illinois estate planning lawyer, DuPage County attorneyThe 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.

Avoiding Estate Planning Mistakes: Preventing Improper Use of Joint Property

Jointly owned property can present many challenges to individuals, especially those couples who are not married and couples where one person is not a U.S. citizen. Without proper consideration, and individual may find himself or herself facing sudden tax-related issues and other concerns that all could have been prevented with proper estate planning.

To start with, joint property opens the door to possible federal and state gift taxes, especially for those non-citizens and non-spouses mentioned above. There's even the potential for double federal estate taxes if the ownership involves two individuals who are not spouses. In this scenario, the whole property is taxed inside the estate of the first to die, excluding where the survivor is able to show their contribution towards that property. Whatever the survivor gets and doesn't use or give away will be included in the survivor's estate, which is also subject to taxation.

Even property that is jointly owned by two spouses has some loopholes: a surviving spouse can leave the property or give away the property to anyone he or she chooses without adhering to the wishes of the deceased spouse. Holding property jointly in this way involves giving up some control at the first death if that individual has specific wishes for the property after he or she passes away. When the jointly held property does pass over to spouse and that spouse immediately spends all assets, the deceased's executor might have a shortage of case to pay estate taxes or other settlement costs.

All of these challenges can be fixed with a little planning. The establishment of a Credit Equivalent Bypass Trust allows for the sheltering of some funds to prevent the double taxation issue. If you would like to discuss your unique needs, contact an Illinois estate planning attorney today for a consultation.

The Link Between Prenups and Estate Planning

The most popular use of prenups is a situation where an individual guards against possible loss in a divorce. In fact, polls indicate that 80% of prenuptial agreements are designed to protect separate property. These documents, however, are growing in popularity as an estate planning tool across genders. According to the American Academy of Matrimonial Lawyers, the desire of more individuals to get married later in life means that individuals are bringing greater individual assets into their marriages.

Prenuptial agreements are also popular with individuals getting married for a second time, since concerns about children from those prior relationships as well as concerns about separate assets factor into the equation here. When developed alongside wills and trusts, couples can walk away with important components of an estate plan. The reason to approach all of this planning together is that trusts and prenuptial agreements are considered contracts and can therefore override a will or give legal grounds to contest an existing will. Headed into remarriage? This is an important time to review all your estate planning materials.

There are many different kinds of trusts that can be used for your individual needs. For example, since vacation and personal homes are often a point of contention between spouses, a personal-residence trust can outline the plans for what happens if a couple gets divorced. This personal-residence trust can be included within the prenuptial agreement. Especially when two families are being combined, it's a good approach to discuss existing financial situations and how a prenuptial agreement can lay the foundation for the future.

Those going into a remarriage tend to be more amenable to a conversation about a prenup, and it can be an important document to draft for both people in the marriage. For more information about prenuptial agreements, contact a DuPage County estate planning lawyer.