Pointers from Philip Seymour Hoffman’s Estate Plan

Philip Seymour Hoffman died unexpectedly February 2, 2014, at age 46. Hoffman had roles in dozens of films. He won the Academy Award for Best Actor for his role in 2006’ Capote and won many other awards for his roles over the span of his career.

Hoffman had been partnered to Marianne (“Mimi”) O’Donnell for 14 years. They had three children, Cooper, Tallulah, and Willa (ages 10, 7, and 5, respectively). Hoffman died with an estate valued at well over $35 million.

We know Hoffman died with a Will, since it was admitted to probate recently. It appears that no other planning, including tax planning, was done. According to his Will, which was signed in 2004, the bulk of his estate is left to his partner, Mimi O’Donnell.

As it stands, Hoffman’s estate stands to owe over $15 million in estate taxes. A little over $5 million of that will go to the state of New York and just under $10 million will go to the U.S. government.

There is much advance planning that could have been done to lessen the tax bite. (Of course, perhaps he did engage in such planning through irrevocable trusts of which we have no knowledge because of their privacy. Perhaps that planning brought his taxable estate down to its current level.) He could have set up a Grantor Retained Income Trust, with O’Donnell as the remainder beneficiary. He could have made annual exclusion gifts into a trust for O’Donnell and his children. There are many other strategies that could have been employed.

He and O’Donnell could have taken one step which would have saved his estate millions. They could have gotten married. Doing so would have allowed Hoffman’s estate to get a marital deduction for the assets left to O’Donnell. If they were firm in their decision to remain unmarried, he could have left his assets in trust for O’Donnell. That way, the assets could have avoided taxation in her estate at her death.

Hoffman could have kept the affairs of his estate private by using a revocable living trust as his primary estate planning vehicle. Then, we would not know the provisions of his plan. As it is, we can link to his Will on the internet.

Unfortunately, as the recent deaths of Philip Seymour Hoffman and Paul Walker demonstrate, even young, vibrant people can pass away suddenly and with little or no warning.