Recently, actor Philip Seymour Hoffman died of an apparent drug overdose. While his life may not have been like yours or mine, there are some lessons to be learned from his estate planning – sadly, the lessons are “don’ts” rather than “dos.”
First, the fact that we as members of the public know anything about his estate planning means that simple steps were not taken to remove his estate from the probate court system, which would have afforded his longtime companion and their children a measure of privacy. Simply by creating and appropriately funding the right type of trust, this could have been avoided.
His will, being some 10 years old, may cause some confusion as it refers only to the oldest of his three children. State law addresses that by splitting any bequest to a child among that child and all of the afterborn children, but Hoffman may have wanted to leave the same amount to each of his children had he consulted with an experienced estate planning advisor.
On a similar note, the assets left to his oldest child provide for distribution in two halves, one at age 25 and the balance at age 30. Using this type of language, rather than “purely discretionary” language means that should one of the children have any type of creditor (including bankruptcy, a divorcing spouse, court judgments against them, etc.) these assets will be subject to those creditor’s claims.
Most of us do not have an estate of $35 million as is estimated for Hoffman, and so we are not likely to expect estate tax bills of $15 million or more. However, with the federal estate tax exemption at just over $5 million, Massachusetts residents must remember that there is only a $1 million Massachusetts exemption – and that life insurance proceeds, retirement assets, cars, jewelry, furnishings, and home equity all count toward that amount. Most residents have exposure to the Massachusetts estate tax.