You Have All The Influence You Choose To Have - Philip Seymour Hoffman
Most of us have envisioned what it would be like to be the beneficiary of a multimillion-dollar estate; however, it is rarely cherished by the beneficiary, the complexity of planning involved to not only protect their interest, but future generations as well. Envision being the beneficiary of a $35 million estate, only for it to be reduced by roughly a third, this was exactly what occurred to Philip Seymour Hoffman’s estate. Due to his decision to choose a simple estate planning technique, approximately $12 million will never make it into the hands of his family; instead, being consumed by unnecessary taxes and fees that could have easily been avoided.
Philip Seymour Hoffman passed away leaving behind his beloved girlfriend and their three young children. While he certainly had the means to hire a top estate planning attorney to develop a comprehensive estate plan; however, Philip took the advice from his accountant who drafted a simple will, opposed to drafting a trust properly addressing his estate planning needs. We recommend that our clients seek the advice from specialists within specific areas of planning, as this division of expertise is paramount to ensure goals do not deviate from their intended path.
Philip’s fatal flaw can be attributed to being unmarried to his girlfriend at the time of his death, since the U.S. Tax code grants married couples with the benefits of unlimited marital deduction and portability. Essentially, if Philip and his girlfriend had been married the estate would have passed to her entirely tax-free. Even if the couple preferred not to marry, the use of trusts and other estate planning devices could have minimized, if not eliminated, the tax burden of his estate.
Philip despised what he called “trust fund kids” and did not want his children to head down that route. On the contrary, trusts for his children would have allowed him to limit their access to assets and could have incorporated financial incentives to help motivate his children as they grew up. Philip could have scheduled distributions based on age attainment, which would have allowed his children to receive funds when they are financially mature and able to make fiscally sound decisions. Philip wanted to expose his children to the arts and cultural opportunities so they would develop the same appreciation. This goal could have been accomplished by writing specific language in the trust to provide distributions to visit metropolitan areas, attend museums and concerts, as well as fund their cultural endeavors. A corporate trustee could have been utilized to make sure his trust instructions would be objectively and faithfully honored.
The key to successful planning is to make sure our intended desires are clearly being expressed and outlined in the road map. While it is easy to assume that we will not fall victim to the same mistakes as Philip, it is critical that we engage in dialogue with trust, tax, and investment specialists. This will ensure any potential tax and legal implications are avoided and our goals are achieved in the manner we desire. Proper estate planning will not only avoid probate, but will keep our family out of the court, public eye, and conflict. Philip said it best, “creating something is all about problem-solving”.