News stories about the estate plans of celebrities can contain many instructive items for everyone. The death and estate plan of actor Philip Seymour Hoffman serves as a clear warning about the need to engage in careful and comprehensive estate planning in order to reduce your family's exposure to creditors, tax collectors, scammers and predators. Truly thorough estate planning is not a “one-and-done” event, because an estate plan that is not updated regularly risks becoming outdated and functioning improperly.
In 2014, many pieces of celebrity news occurred that highlighted the importance of careful and thorough estate planning. That year, the public witnessed the temporary disappearance of Casey Kasem and the family of Mickey Rooney battling over the late actor's estate. But perhaps the most instructive celebrity estate planning story was that of actor Philip Seymour Hoffman, who died suddenly in February 2014. Sadly for the late Oscar winner, his approach to estate planning, in many ways, demonstrated an entire series of glaring errors in terms of how to approach estate planning.
While Hoffman hired an attorney to draft a will, that attorney was someone who worked primarily with real estate matters. As you seek out a legal professional to help you with your estate, it is important that you look for someone experienced and knowledgeable in estate planning. Both psychiatrists and neurosurgeons deal with medical matters involving the brain. But just as you would consult the psychiatrist, not the brain surgeon, about your bipolar disorder, you should take care to retain an attorney who practices regularly in the area of estate planning, not some other area of the law.
The actor's plan was also not ideally suited for his unique situation. Hoffman accumulated an estate of around $35 million. Hoffman and his partner, Mimi O'Donnell, shared a long-term relationship, including having 3 children together, but they never married. In his will, the actor left his estate outright to O'Donnell. Choosing this technique creates many potential problems for O'Donnell. The sum she will receive will be dramatically reduced because that $35 million inheritance will trigger a huge tax bill. Additionally, that inheritance is also exposed to any creditors O'Donnell might have. Creating a trust for the benefit of O'Donnell and/or the children could potentially have significantly reduced or eliminated the tax obligation and/or the potential exposure to creditors.
Another mistake the actor made was not updating his estate planning the 10 years from the time he created his will until his death. During that decade-long span, two of his three children were born. In some states, if you leave a child anything outside your will and omit them from your will, then that child is entitled to nothing from your estate. So, for example, had Hoffman created savings accounts for each of his children, the two youngest children would receive nothing from their father's probate estate, even if the savings accounts had only a few dollars in them and even if the actor wanted all of his children to share in his wealth. Failing to update one's estate plan regularly, or at least every time a major life event (such as birth, death, marriage or divorce) occurs, can be one of the surest ways to end up having an estate plan that, upon your death, functions dramatically different than how you actually wanted.
Finally, Hoffman's choices led to his estate plan's exposure to the entire world. The actor's will, like any will, is a matter of public record, according to the law. Using trusts as part of an estate plan can help protect your family's privacy. Placing the inner workings of your estate planning objectives and preferences in a trust often will allow you to shield that information from the general public, including scammers and other predators.