Estate Planning Mistakes of Philip Seymour Hoffman

Oscar-winning actor Philip Seymour Hoffman’s Will was filed for probate and provides a cautionary tale when it comes to estate planning mistakes.

Here are four (4) things he could have done differently to ensure privacy, protect his beneficiaries, reduce estate taxes, and maximize the transfer of property to his family:

Create a Revocable Living Trust

Hoffman was a public figure who valued his privacy. Yet by not establishing a Revocable Living Trust, he let the world in on his private life when his Will was admitted to probate. We now know that his son will inherit his share upon attainment of age thirty (30) and we’ll also know the total size of this estate when an inventory is filed with the Court, as required by law.

While a Will is a cornerstone of an estate plan, the terms and provisions contained in a Will become a public record when this legal document is filed with the probate court. In contrast, a Revocable Living Trust is a private legal agreement, which is not filed with the probate court upon death. Therefore, a Trust funded during his lifetime would have allowed Mr. Hoffman to have kept his private wishes private.

Update an Estate Plan to Protect Beneficiaries

Mr. Hoffman signed his Will in 2004 and never updated it, so his two young daughters were not mentioned or provided for in his Will. His estate has been valued at $35 million, and his executor is his long-time companion who is also the mother of their three children. While after- born children are provided for by state law, Mr. Hoffman lost a valuable planning opportunity to create trusts for his daughters, which could easily have been established under the terms of an up-to-date Will or Trust.

Utilize Asset Protection Strategies

While Mr. Hoffman did create a Trust under the terms of his Will for his son Cooper, (appointing Cooper’s mother as sole trustee), that Trust will terminate when Cooper turns thirty (30) years of age. As a result, all assets comprising Cooper’s share of his father’s estate will distribute to him outright in one lump sum. Instead, Mr. Hoffman could have created a Lifetime Asset Protection Trust that would have safeguarded Cooper’s inheritance, protecting him from the claims of future predators, creditors, and lawsuits. In addition, incentive provisions could have been included in Cooper’s Trust which could have encouraged him to become a responsible and productive member of society.

Use Tax-Saving Techniques

Since Mr. Hoffman was not married to his long-time companion, his estate will not qualify for the unlimited marital deduction. As a result, there will be an enormous estate tax bill to pay, both state and federal, due in cash, nine (9) months after his date of death. The use of other tax-saving estate planning strategies, including an Irrevocable Life Insurance Trust (ILIT), could have allowed transfer taxes to be paid FOR his estate instead of FROM his estate, preserved valuable assets and resulting in more property passing intact to Mr. Hoffman’s family.

If you have an estate planning question and/or idea for a future edition of Estate Planning Matters, please email us or contact attorney Phil Levin at (610) 977-2443.