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.

Tips on Leaving Inheritances to Your Children

estate plan, children, inheritance, will, trust, Illinois estate planning lawyer, beneficiariesAccording to an article from AARP, baby-boomer parents will be leaving $30 trillion to their children over the next four decades, keeping in mind factors such as longevity, the economy and the stock market. There are steps you can take to ensure that the estate plans you make are carried out in the easiest and less painful way possible.

One of the most important factors to keep in mind is communication with your children about where you stand financially. Fidelity Investments conducted a survey that revealed that most people underestimate their parents' financial worth by approximately $100,000.

It's also important to let your children know who to contact in the event of your death, as well as where important documents are kept for safe-keeping.

Ideally, the division of your estate should be equal among your children. If, however, you choose a different division, explaining why you are dividing assets the way that you are can help ease any resentment later on. If you aren't comfortable having that discussion, legal experts suggest you leave a note in your will, explaining your decisions.

It's also not a good idea to choose one child to be in charge of the dividing of funds and property. It's better to do it yourself. For example, have a list made of who gets what piece of art, jewelry, etc.

Any insurance policies should have all your children listed as beneficiaries, not just one with the expectation they will share the proceeds equally with their siblings.

Many experts recommending setting up trusts for your children, this is another way to ensure that the estate you are leaving will not be spent foolishly after you are gone. The funds can be released to your child in stages and not just in one lump sum. You can also have provisions denying or delaying the release of funds, such as in the case of a substance abuse issue.

Estate planning can be complicated so it's important to contact a knowledgeable DuPage County estate planning attorney to make sure that your assets are protected

Different Kinds of Trusts and Their Uses

If you have property or assets that you want to leave to your heirs, then you have several options.  A trust can shield these assets from taxation and also probate.  It allows you to protect your legacy and control your wealth.  They are essential to good estate planning so it is important to know what they can do.

There are two types of trusts.  The first is a living trust, which is called that because it is active during the grantors lifetime.  A living trust can either be revocable or irrevocable.  A revocable trust can be changed at any time in the grantor's lifetime.  If a relationship, circumstances or your intentions change then it is not an issue.  But while it does avoid probate, a revocable trust is subject to estate taxes.

An irrevocable trust is the opposite.  It immediately transfers your effects out of your estate and into a separate legal entity. There is no way to change your mind or use these assets because they are not yours anymore.  Benefits of an irrevocable trust is that it can avoid probate and estate taxes.

The other type of trust is called a testamentary trust.  These kind are specified in a will document and only created after the grantor has died. The funds can be subject to probate and estate taxes but can accomplish a variety of goals.

One example is a bypass or credit shelter trust which can protect your estate from taxation.  It allows the transfer of the most money allowed without being subject to taxation and then moves the rest to your spouse completely tax free, even if the estate grows.  Another example is a generation-skipping or dynasty trust.  It allows the transfer of a sizable amount of assets tax-free to beneficiaries that are at least two generations removed, such as grandchildren.

If you are interested in leaving the most assets to your heirs, then you should consider setting up a trust.  Contact an experienced estate planning attorney in DuPage County who can suggest the best trust for your given situation.