By Sarah Stewart Legal Group
We all know Philip Seymour Hoffman. He was the lovable actor who made appearances in many movies, including Twister, The Big Lebowski, Capote, and the Hunger Games movie series. His death in 2014 was a tragic end to an acclaimed life. Unfortunately, like many stars before and after him, Hoffman made some disastrous estate planning mistakes. Today, we will learn from him.
Hoffman died with a $35 million estate. His girlfriend and their 3 children survived the actor. Hoffman chose a Last Will and Testament as his estate plan for his family, due to his stigma against trusts. He was determined that his children would make their own way in the world and not become “trust fund babies.”
Hoffman’s stigma and choice led to his estate owing $12 million in taxes. Had Hoffman chosen to marry his girlfriend, or used appropriate estate planning tools, he may have been able to save his family that $12 million.
Hoffman also demanded that certain funds be used for specific purposes for his children and their education, something that Representatives of Wills are not required to do by law. Only a trust requires the Trustee to follow your express restrictions as to when and how money will be used for heirs.
Hoffman’s choice of using a Will saddled his family with more costs, delays in receiving their funds, and allowed the proceedings to be public record. Courts take fees for every probate filed. Attorneys take fees as well. Creditors must be notified of the death and are allowed to file claims for money. Should the probate require additional work, such as selling property, there may be even more exceptional fees tacked on to the final bill.
Also, Hoffman’s children are still minors. This means, given the large amount of his estate, the Court may require Guardians to be appointed to manage those funds. The Guardians would likely be required to establish trusts for the children’s benefit so the funds are properly managed. In essence, Hoffman’s children may become “trust fund kids” regardless of his best intentions.
Hoffman’s choice left his estate open to his girlfriend’s creditors, possible new husband/boyfriend and future kids, as well as a possible second dip into the assets for a second round of estate taxes on his girlfriend’s death. Trusts options would have allowed Hoffman to avoid all of these additional problems. Pre-planning your estate is vital for any estate, but large estates especially.
Estate planning, and trusts, provide so many different avenues to reach your planning goals. Trusts can provide tax benefits, restrictions on how or when funds will be used, protect your heirs’ funds from their creditors and/or divorces, and other lawsuits.
Though Oklahoma has no estate tax, other states do. If you live outside of Oklahoma, you will need to consider your state’s estate taxes as well as Federal estate taxes in your planning.
Reach out to a professional to help you plan your estate. Don’t wind up making the same mistakes as some of our most famous and wealthiest stars.