Philip Seymour Hoffman, the talented though perhaps controversial actor, recently passed away due to a heroin overdose.  His long term partner, Marianne O’Donnell, has filed his Last Will and Testament for probate in New York, and the probate of Hoffman’s Will has become the subject of much discussion for it’s common though preventable estate planning mistakes:

1.  Hoffman failed to update his documents as his estate and family changed

In 2004 when Hoffman wrote his Will, he was dating Marianne O’Donnell and had one child, Cooper.  Hoffman’s Will provides for everything to go to O’Donnell, and then to Cooper if O’Donnell fails to survive him.  The problem?  Hoffman and O’Donnell had two more children after the Will was written who are not mentioned or provided for in the Will.

Depending on the state, the law may intervene to provide that such “after born” children should inherit their fair share at the time of probate unless otherwise provided for (such as naming them the beneficiary of a life insurance policy).  It’s possible that Cooper will be left out entirely while his two sisters receive a share of the estate now.  If O’Donnell needs to disclaim any portion of her inheritance, the two daughters may or may not be entitled to receive their share of that disclaimer.  Whatever happens, the estate will have to hire attorneys for the children to represent their interests and sort out their inheritance rights – extending, complicating, and greatly adding to the costs of this estate.

2.  Marriage saves money when it comes to estate taxes

Hoffman’s estate is reportedly worth about $35 million.  Current federal law allows an individual to shelter up to $5.34 million dollars before triggering any estate tax (with rates of up to 40%).  But, an individual can leave an unlimited amount to his or her surviving spouse (including a same sex spouse!) without paying any estate taxes.  By doing so, the estate tax is deferred until the death of the surviving spouse.

By staying single, only up to $5.34 million of Hoffman’s $35 million estate is exempt from the federal estate tax.  In addition, the state of New York has a separate estate tax over any estate worth more than $1 million.  Without taking any action (such as a disclaimer mentioned above), O’Donnell may lose about $15 million of her inheritance to estate taxes that would have been avoided had they been legally married.

3.  A revocable living trust would have protected Hoffman’s family from the media circus now surrounding the probate of his estate

Probating a Will is a public process – all documents in the probate get filed with the court and are accessible by the public.  People with privacy concerns such as an Oscar-winning actor would be much better served with a living trust based estate plan.  The terms of a living trust remain private, and matters such as those we are discussing above can be sorted through outside of the court system to a great extent and avoid becoming the example of “what not to do” blog posts, articles and discussions across the country.

Whether a last will and testament or revocable living trust, a well drafted document can make or break your estate plan.  See a qualified and knowledgeable estate planning attorney today to protect your family and loved ones from the unexpected!