Philip Seymour Hoffman’s Death Provides Estate Planning Lessons

Donald L. Knapp, Esq.

While Philip Seymour Hoffman’s death has focused attention upon the severe consequences of heroin addiction, his death can also provide lessons for families who do not have an estate plan.  In addition to three children born of his longtime companion, Marianne O’Donnell (“O’Donnell”), Philip Seymour Hoffman (“Hoffman”) also left a sizable estate worth approximately $35 million. Even though most of us will not amass that level of wealth, it is not impossible for a small business owner or professional who is a prudent investor to have a net worth that approaches $5 million.  More importantly, most married couples will have children that they will want to protect in the event of an untimely death.

A review of Hoffman’s Last Will and Testament (“Will”) reveals that his attorney did not due him any tax favors.   First, because Hoffman did not shelter any of his wealth, he will be paying approximately $11.46 million in Estate taxes.  The Estate Tax, which is also known as the death tax, taxes property that you own at the time of your death, such as cash, securities, real estate, annuities, and insurance.  In 2014, the first $5.34 million is exempt from the Estate Tax; however, the IRS will impose a 40% tax on all property that exceeds that amount.  Because you can give an unlimited amount of money to your spouse throughout life or as part of an estate plan, if Hoffman had married O’Donnell his estate could have passed directly to her without the requirement to pay any such taxes.  However, because O’Donnell was simply Hoffman’s “companion”, no such tax breaks are available.

Hoffman’s will is also problematic because it only makes reference to his oldest son, Cooper, not his daughters, Tallulah and Willa, who were born after the Will was executed.  In fact, it does not contemplate any children that he may have later.    Typically, wills contain language which provides equally for children specifically named in it as well as children born after the Will is drafted.  Hoffman’s Will contains no such language.  While O’Donnell will undoubtedly have full custody of the three children, it is possible that the children will have disparate amounts depending upon whether Hoffman made O’Connell or his children as beneficiaries of his bank accounts.

In short, marriage status and a properly drafted estate plan could have avoided much of the mess that Hoffman left for his companion to clean up.  Ultimately, whether you are fortunate to have substantial assets or whether you simply blessed with children and a comfortable lifestyle, it is important to plan for the unexpected so that your family is protected and they are the primary beneficiaries of your hard work, not the IRS.

If you have estate planning needs or questions please call Don Knapp at 248.380.0000 x 3213.