Potential Tax Hit of Philip Seymour Hoffman's Estate

Philip Seymour Hoffman's will, will, estate plan, update your estate plan, Illinois estate planning lawyer, DuPage County attorneyThe recent death of 46 year-old Philip Seymour Hoffman was a loss felt by the entertainment industry and the talented actor's large fan base. What might make Hoffman's death even more tragic is the family he leaves behind, including his three young children and their mother, Mimi O'Donnell.

The actor, who died from a drug overdose, left behind an estate estimated at $35 million. A recent article in Daily Finance reveals that there are several issues with the estate that could prove costly for his heirs – and that could have been easily avoided.

When Hoffman died, he did leave a will. However, that Philip Seymour Hoffman’s will was drawn up in 2004. At the time it was written, he and his partner had one child together, a son. The will left part of the estate to his son, in the form of a trust, and the rest to O'Donnell. In the decade that passed, Hoffman never updated his will. The couple had two more children together but nothing in the will has been changed to reflect that. Neither one of the girls are mentioned in the will.

It's important to update your estate plan whenever a major life event occurs, such as a birth of a child, a wedding, divorce or a death. Otherwise the legal battles that can ensue between heirs can be very costly, both financially and emotionally.

Another issue could cause the estate to take a heavy hit in taxes. Although Hoffman and O'Donnell had been in a relationship for a long time, they never married. Therefore, the funds left to O'Donnell won't qualify for the unlimited marital deduction. This deduction allows one spouse to leave the other spouse an unlimited amount of financial assets without the surviving spouse having to pay estate tax on those assets. Because Hoffman and O'Donnell never married, O'Donnell will have to pay an estate tax of 40 percent of what she inherits. Had the two married, approximately $12 million would be going to O'Donnell instead of the IRS.

These oversights in estate planning that Hoffman made are also ones can affect much smaller estates. It's important to make sure your estate planning is up-to-date and drawn up in the best interest of your heirs, whether your estate is worth $35 million or $3500. Contact a qualified Wheaton estate planning attorney to discuss how you can secure your family's future.

Avoiding Estate Planning Mistakes: Preventing Improper Use of Joint Property

Jointly owned property can present many challenges to individuals, especially those couples who are not married and couples where one person is not a U.S. citizen. Without proper consideration, and individual may find himself or herself facing sudden tax-related issues and other concerns that all could have been prevented with proper estate planning.

To start with, joint property opens the door to possible federal and state gift taxes, especially for those non-citizens and non-spouses mentioned above. There's even the potential for double federal estate taxes if the ownership involves two individuals who are not spouses. In this scenario, the whole property is taxed inside the estate of the first to die, excluding where the survivor is able to show their contribution towards that property. Whatever the survivor gets and doesn't use or give away will be included in the survivor's estate, which is also subject to taxation.

Even property that is jointly owned by two spouses has some loopholes: a surviving spouse can leave the property or give away the property to anyone he or she chooses without adhering to the wishes of the deceased spouse. Holding property jointly in this way involves giving up some control at the first death if that individual has specific wishes for the property after he or she passes away. When the jointly held property does pass over to spouse and that spouse immediately spends all assets, the deceased's executor might have a shortage of case to pay estate taxes or other settlement costs.

All of these challenges can be fixed with a little planning. The establishment of a Credit Equivalent Bypass Trust allows for the sheltering of some funds to prevent the double taxation issue. If you would like to discuss your unique needs, contact an Illinois estate planning attorney today for a consultation.

Challenges Facing Baby Boomers Illustrate Importance of Planning

Millions of baby boomers today are helping to care for aging parents. Whether it's handling healthcare needs or helping with the day-to-day aspects of life, baby boomers are serving as the stopgap for older parents who might not have anticipated their needs in advance. The pressure put on baby boomers in this situation highlights the importance of proper estate planning.

Many people caring for an older parent are doing so while juggling responsibilities of their own, like working full time and taking care of immediate family members. Some have even put their own health care on hold in order to care for a parent in the short term.

While people often underestimate the cost of retirement and the assistance they might need during this period, some proper planning in advance could help to relieve the amount of responsibility falling on adult children.

A study from AARP in 2010 shows that the ratio of possible caregivers for every person in the high risk category of 80 years or older was 7 to 1. By the year 2030, that number is expected to drop as far as 4 to 1 due to longer life spans, smaller families, and increasing rates of disability.

Relying on friends and family members for care probably shouldn't be the only approach towards retirement and old age planning.

Baby boomers are more likely than other generations to have disabilities later in life, possibly even impacting their ability to make decisions about their own care. Deciding to set an estate plan in place earlier on can give you peace of mind and ensure that no matter what happens in the future, you have some groundwork laid with your will, trusts, and other critical estate planning documents.

If you are prepared to get started with your own documents and planning, contact an Illinois estate planning attorney today.