The Last Will and Testament of Oscar-winning, renowned actor Philip Seymour Hoffman was filed in the New York Surrogate Court this last week. The Will was drafted in October 2004 and left the entirety of his estate first to his long-time companion and mother of his three children, Marianne O'Donnell, and if she didn't survive, then alternatively to his son, Cooper. Unfortunately, many things had occurred in Mr. Hoffman's life between the time he signed his Last Will and his death - including the subsequent birth of his two daughters Tallulah and Willa.
Reviewing a copy of Mr. Hoffman's Last Will reveals several universal lessons that apply to every person's estate plan, regardless of wealth:
The importance of updating your estate plan. Mr. Hoffman signed his Last Will in 2004, when he only had one child. However, it is clear that Mr. Hoffman did not review and update his Will or estate plan in the subsequent nine years before his death as the Last Will did not mention his two daughters that were born after the Last Will was signed. It is not likely that Mr. Hoffman intended to omit his two minor daughters, but that his estate plan was simply not revised to include these subsequently born children. Many people view their estate plans as one-time static events - you sign it and put it away. However, I encourage clients to perform a comprehensive review of their estate plans no less than every 3 - 5 years to see if there have been any changes in family members (births, deaths, divorces), family dynamics (disputes, reconciliations, special medical needs, spendthrift or substance issues), assets (purchases, sales, distributions), and laws. In this manner, a client's estate plan will always reflect his or her current wishes and family circumstances.
The importance of Living Trust based estate planning. One of the reasons that you are reading this article is that Mr. Hoffman's Last Will is now public record - anyone can obtain a copy of his Last Will. As a result, the entire world can (and likely will) follow the entire saga of the Hoffman estate as it unfolds through the New York probate court system, including the nature, value, and ultimate distribution of his assets. One of the many benefits of a Revocable Living Trust is that the Trust and its assets are not subject to probate or public disclosure in the courts after your death. As such, your family can maintain its privacy over the type and extent of your assets, and the identity of your beneficiaries.
The importance of distribution planning. Mr. Hoffman's Last Will provides that if his son, Cooper, had inherited the estate (assuming that Ms. O'Donnell had predeceased), then Cooper's inheritance would have been held in trust for his benefit, with one-half of the trust assets distributed at age 25, and the balance at age 30. These "stated age" provisions are the most common form of distribution that I see in estate plans and trigger distributions to a child simply because he or she has reached a certain birthday. However, these provisions do not take into consideration a child's circumstances when he or she reaches that stated age. If the child is in the midst of a divorce, financial crisis, litigation, or other adverse life event at the time of that specific birthdate, then the child could be receiving a significant distribution of his or her inheritance at the worst possible time. I encourage clients to consider these "what ifs" and how we can structure the distributions so that the family wealth is received in a protected environment and not diminished by creditors, predators, and other incidents of life.
The importance of estate tax planning. Mr. Hoffman's estate has been estimated at $35 milllion at the time of his death. While it is possible that Mr. Hoffman engaged in some form of estate tax planning, it is not reflected in the Last Will. Given the current $5.34 million federal estate tax exemption and the 40% tax on the excess over the exemption, it is estimated that Mr. Hoffman's estate could owe $15.1 million in federal and state estate taxes. Estate taxes are one of the truly "optional" taxes within a taxpayer's control and, with proper planning, can be minimized or wholly avoided. There are many specialized trusts and planning techniques that can be used to reduce the tax value of your estate during your life and at death, and redirect to your family or charity what would otherwise be paid in unnecessary estate taxes. You get to decide how much in estate taxes will be paid; but if you fail to properly plan, then the law will make that decision for you.
The importance of values-based planning. One of the most remarkable portions of Mr. Hoffman's Last Will was the directions that Mr. Hoffman left to the guardian of his son (and presumably for his daughters too). Specifically, Mr. Hoffman expressed his preference that his children be raised in Manhattan, Chicago, or San Francisco, and if not, then his children be allowed to visit these cities at least twice a year to expose them to the "culture, arts and architecture that such cities offer." In this regard, Mr. Hoffman's Last Will was more than a mere technical disposition of his assets, but left a piece of himself and an expression of a passion that he hoped his children would hopefully enjoy as well. Every estate plan should be a reflection of your hopes, dreams, beliefs, purposes and passions and leave a "legacy" of the values that you want to pass down to your beneficiaries. With some thought and creativity, your estate plan can be more than a dry, sterile set of asset instructions, but can be driven by your most heart-felt wishes for your family.
We often assume that the estate plans of celebrities will be examples of well-thought out, accurate, and efficient dispositions of their wealth. However, as we can see from the Last Will of Philip Seymour Hoffman, even the rich and famous fall prey to some of the most common flaws in estate planning. Hopefully, we can all recognize and implement the five lessons above so that our own estate plans leave a better story.