The Last Bad Act of Actor Phillip Seymour Hoffman

5 lessons from a bad estate plan.

by Sean O'Bryan

I have always been a fan of actor Philip Seymour Hoffman. His work in such movies as Doubt, Moneyball, and his Oscar-winning performance in Capote made him easy to admire. His performances were filled with complexity and layers. 

When he died unexpectedly this past February, he left an estate valued at over $35 million dollars. As an actor, he was in high demand for his services and tended to by a staff of professionals. That said, the estate plan he left was a significant disaster, costing those he loved millions in unnecessary taxes and costs, and potentially omitting 2 of his 3 children - all by accident.

There are at least 5 significant lessons that we can learn from these mistakes. Let's examine them closely.

Phillip Seymour Hoffman enjoying a Knicks game with his son

Hoffman had 3 children with his longtime girlfriend, Mimi O’Donnell

1. Mistake One: Hoffman's Plan was Badly Out-of-Date.

A copy of Philip Seymour Hoffman's last will and testament is available for download here. His will was created in 2004. He never updated between then and his death. Many things changed in Hoffman's life over that decade. He had 2 additional children beyond the one mentioned in his will. His net worth increased many times over its 2004 value. He had moved to New York. The will was signed in Colorado and chose that state for Probate. These failures will cost this estate millions of dollars in unnecessary costs.

Lesson One: The bottom line is that nobody knows when their will is going to be needed. The lesson to us is that at significant life events, don't forget to update your estate plan.

2. Mistake Two: Hoffman's Lawyer Failed to Create a Living Trust.

We know so much information about Philip Seymour Hoffman's estate plan and net worth because his attorney wrote him a simple will, not a revocable living trust. Wills require Probate and become part of the public record. Trusts remain 100% private. 

Philip Seymour Hoffman's will was available to the public hours after it was submitted to the Court! Would you want your nosey neighbor, someone looking to profit from your estate, or a disinherited family member to have a complete copy of your last wishes, together with the accompanying list of all of your assets? Of course not. That is one of the main reasons we suggest a Trust for most clients.

Also, it should be noted that Probate takes a long time to complete. The national average is 18 months. A trust can be settled much quicker. 

Lesson Two: Trusts are private, wills are public.

3. Mistake Three: He Cost His Family Millions in Unnecessary Taxes.

Although Hoffman and his partner, Marianne (Mimi) O'Donnell, were a couple for 14 years and had three children together, they never formally married. Hoffman's estate is estimated to be worth $35 million, and a large portion of that will be paid to the IRS for federal estate tax. Within 9 months of his death, his estate will probably have to pay about $15 million in federal and state taxes – whereas if the couple had tied the knot at some point, the entire estate would probably have been tax-free! This amount is due in cash.

Of course, the decision to marry is complex and involves many considerations other than estate taxes. Still, one has to wonder whether Hoffman might have felt differently about marriage if he had known that remaining legally single would be so costly to his long -time partner and his children. It's also worth noting that even if Hoffman had still wanted to remain single, he might have been able to use other techniques to reduce the tax burden for his heirs, such as a well-written trust designed to limit estate taxes.

Lesson Three: Even someone with a paid staff of advisors needs additional opinions when it comes to complex tax and estate issues.

“But if O’Donnell remarries and becomes part of another family, she could eventually leave a big chunk of Hoffman’s wealth to complete strangers rather than to Hoffman’s own children.”

4. Mistake Four: Hoffman's Children have No Protection.

His will gives everything to Marianne O'Donnell, who is also the mother of his three children, but allows her to disclaim a portion of his assets in favor of their first son, Cooper. These disclaimed assets would be held in trust for his son when he gets older. 

Additionally, because Hoffman never updated his will after his other two children were born, only his oldest son stands to benefit from this will. Hoffman's other children will likely get nothing, unless they sue the estate, when they turn 18, claiming that Hoffman accidentally omitted them. This is a challenge that pits sibling against sibling and requires the Court to use its equitable powers to assume what Hoffman would have wanted. 

It is assumed that O'Donnell, the mother of all three children, will take care of them. But if O'Donnell remarries and becomes part of another family, she could eventually leave a big chunk of Hoffman's wealth to complete strangers rather than to Hoffman's own children. Hoffman could have largely avoided this prospect by using a good trust, which eliminated his girlfriend's discretion, and made protecting his children mandatory.

Lesson Four: Create and update your estate plan in such a way that your children are protected.

Hoffman with Mimi O’Donnell and one of their 3 children

While it is assumed that the children’s mother will act with their best interest in mind, her decision to marry or her death could adversely affect their children.

5. Mistake Five: Violating the "Dead Hand" Statute.

Since the beginning of written wills, people have attempted to control their property long after they are gone. Because it would be a bad public policy for certain assets (large tracts of land, for example) to be controlled by someone who died generations ago, or some restrictions violate public policy ("My son shall receive his inheritance provided he goes to the University of Michigan, drives a Ford, and marries a good Catholic girl"). Therefore, all states place restrictions on what can and cannot be controlled by a will or trust. Lawyers call these laws "Dead Hand" Statutes. 

The trust inside of Hoffman's last will (called a testamentary trust) had some rather peculiar conditions. One provision was that his son is raised and reside in or near Manhattan, Chicago, or San Francisco. The will goes on to state that if his son cannot live in any of these cities, he requests that his son visit these cities at least twice a year. The purpose of this request is so that his son would be exposed to culture, arts, and architecture. These provisions are arguably unenforceable - and at a minimum, expose the estate to further litigation and costs. 

There is nothing wrong with placing conditions on a child's inheritance. But this should have been in a different type of trust and should have included discretionary language allowing the chosen trustee some latitude. 

Lesson Five: It is alright to place some restrictions on the inheritance you leave to a child or grandchild, but you need a lawyer versed in the legalities of these restrictions to advise you and draft them in a way that prevents a contest.

The Bottom Line:  Philip Seymour Hoffman left his family with a mess. An out-of-date will, unnecessary taxes, disinherited children, strange provisions, all exposed in very public Probate - and all of which could have been avoided. 

You don't have to have an estate the size of Mr. Hoffman's to benefit greatly from a proper estate plan. One day in the future, your family will say thank you - and look back on the last lesson in responsibility you leave for them.