Phillip
Seymour Hoffman left nothing to his children the headlines proclaim. http://www.today.com/parents/philip-seymour-hoffman-leaves-35m-partner-instead-kids-1D79959171
He didn’t want “trust fund kids.” http://nypost.com/2014/07/21/philip-seymour-hoffman-didnt-want-trust-funds-for-his-children/
Many people have scruples about inherited wealth, and people as diverse
as Sting, Anderson Cooper, and Warren Buffett have recently expressed their
views that it can sap initiative and otherwise adversely affect children. But in the case of Phillip Seymour Hoffman,
it actually would have been much more surprising from an estate planning standpoint
if he had left substantial property to his children.
Why? Because
when a person is relatively young, and dies leaving a surviving spouse or
partner, and all children are from that relationship, and especially if all
children are minors, the usual plan is to leave everything to the spouse or
partner. The reason is that the spouse
or partner will likely need to use those assets for his or her support and the
care and support of the minor children, and the spouse or partner is the best
person to look out for the children and do what is in their best
interests. All of those factors applied
in Hoffman’s case. And, in fact, he
left substantially everything to his partner, Mimi O’Donnell, the mother of his three young
children.
Sometimes
people leave property to the surviving spouse or partner in trust. There are various reasons for that, including
lack of expertise in managing money, creditor protection issues, and concerns
about making sure that property is not diverted to a subsequent spouse, partner
or child of the survivor. But especially
when the survivor is young and the children are minors, leaving property
outright is not unusual.
So what
Hoffman did is typical. But Hoffman did
have a special estate planning challenge: his estate was large enough to be taxable, and
he was not married to Ms. O’Donnell, and so could not take advantage of the
marital deduction. If he had been
married he could have left his entire estate to her completely free of estate
tax. Because he was not, and assuming he
left a $35 million estate, his estate faces a hefty estate tax bill of some $12
million.
Thus, the
true estate planning challenge in Mr. Hoffman’s estate would have been figuring
out ways to transfer property to Ms. O’Donnell in a more tax advantaged manner
and/or incorporating some charitable planning in order to reduce the estate tax
burden - but that had nothing to do with
his views about “trust fund kids.”
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Advice
This blog is not legal advice and no
attorney-client relationship is formed.
The information and materials on this blog are provided for general
informational purposes only and are not intended to be legal advice. The law changes frequently and varies from
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specific circumstances. Nothing on this
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