Life is short and unpredictable. This sentiment is repeated so often that it has become cliché and few of us stop to truly think about what it means practically. But Americans were recently given a somber reminder of its meaning with the unexpected death of Philip Seymour Hoffman, who was widely considered one of the greatest actors of our time.
Hoffman's death of an apparent heroin overdose was not unthinkable. After all, the 46-year-old actor had struggled with the disease of addiction for most of his life. But because his relapse and eventual overdose happened after more than 20 years of clean and sober living, it was certainly unexpected. The fact that Mr. Hoffman had not updated his will and had failed to attend to other estate planning needs complicates the financial future of his three children and their mother, Hoffman's longtime girlfriend Marianne O'Donnell.
Hoffman was worth approximately $35 million at the time of his death. If he and O'Donnell had been married, she would have been able to inherit the entire amount tax-free. Because they were not married, however, state and federal estate taxes could amount to as much as $15.1 million.
Also complicating matters is the fact that Hoffman's will was last updated in 2004. At the time, only one of his three children had been born. His will allows for the opportunity for O'Donnell to turn down either a fraction or all of her inheritance and to put it into a trust for her children instead. But again, only the oldest child is mentioned in the will. There are some ways around the restrictions that would allow all three children to share equally in the trust, but the process will pose logistical challenges at the very least.
The bottom line is that none of us can be certain of the future, including how long we will live. If you have a family, it is especially important to plan for the “what ifs” to ensure that your loved ones will be taken care of in your absence. Creating an estate plan now and updating it regularly is critical to achieving that goal.
Source: Forbes, “Philip Seymour Hoffman's Will Raises Legal Problems,” Deborah L. Jacobs, Feb. 20, 2014