When you plan your estate, there are ways to prevent the loss of assets due to taxes and other fees or fines. When you don't take the right steps when planning your estate, the assets you transfer to your loved ones may end up costing them money or be heavily taxed.
Looking at the estate of the late Philip Seymour Hoffman, there are a few things that he could have done to save his loved ones millions of dollars. For instance, he didn't want his kids to grow up as so called "trust fund" kids, so he decided to leave all of his wealth to his girlfriend in the case that he died. That $35 million estate was supposed to care for her, and then she was to care for their children.
The problem with this plan is that his estate ended up owing a shocking $12 million. How could he have prevented it? By marrying his girlfriend, they would have paid no estate taxes at all.
Since he used a will instead of an estate planning document, the family had to go through probate. This is a long process fraught with delays and extra costs. Fees are based on the gross assets, which means there could be hundreds of thousands in additional fees beyond estate taxes.
This is an example of why it's a good idea to look into trusts. Trusts protect beneficiaries against taxes and lawsuits from creditors, for example. Trusts can have extremely specific requirements, too, so they're not just handing money to children or beneficiaries without them meeting the obligations you've set.
If you're not sure about how to best provide for your beneficiaries, it's a good idea to look into trusts. Your attorney can help you take care of your estate planning needs to make sure you're protected against taxes, fees and other unexpected expenses.
Source: Kiplinger, "Philip Seymour Hoffman’s $12 Million Estate Planning Mistake," John M. Goralka, July 15, 2017