July 2017 – Philip Seymour Hoffman was a talented actor … but not a good estate planner. He died in 2014 and was survived by his girlfriend, Mimi, and their three children, ages 10, 7 and 5. He did not want “trust fund kids” so he used a will prepared by his CPA to leave his $35 million estate to his girlfriend. She was to provide for their children. The lack of planning results in his estate owing estate tax of approximately $12 million. If Philip had married Mimi, his family would have saved approximately $12 million and paid no estate tax whatsoever. Philip also stipulated that funds were to be used for his kids to visit major metropolitan areas for the express purpose of providing his children with access to the arts. This is an example of an incentive provision or trust to help motivate his kids to become the adults that Philip wanted them to become. An average probate in California without litigation or other issues takes between nine months and 1.5 years. Philip’s probate will almost certainly take longer due to the size and complexity. After the probate is completed, Philip’s estate will be at risk after distribution to Mimi if she is sued, challenged by her creditors or even in a later divorce if she remarries. That legacy may also be reduced by a second estate tax on her death. Philip could have provided for Mimi with a Personal Asset Trust, which would help protect her from divorce, lawsuits by predators or fortune hunters, creditors and even a second estate tax imposed on Mimi when she dies.
Source/more: Kiplinger
