The Last Will and Testament of Philip Seymour Hoffman - How Not Being Married Can Cost Your Estate Dearly in Estate Tax

By: Jim Dossey, MS, MBA, JD -

Philip Seymour Hoffman, a highly talented and accomplished American actor and director, appeared in over 50 films over his career. An apparent drug overdose, Hoffman was found dead in his New York apartment on February 2, 2014 at the age of 46 years old with a needle in his arm and a substantial amount of heroine and prescription drugs at the scene. At the time of his death, the value of Philip Seymour Hoffman's estate was estimated at $35MM.

Hoffman left his entire estate to Mimi O'Donnell, the mother of his three children. Hoffman's Will left a number of issues to contend with, not the least of all was a huge tax burden on his estate. The problem, in this case, is that Hoffman and O'Donnell were never married. According to IRS estate tax law, one can pass an unlimited amount of property to his or her spouse tax free. This provision in the IRS tax code is called the "marital deduction."

Under the tax code, all US citizens are entitled to a $5.34MM exemption from estate tax. Because Hoffman and O'Donnell were not married at the time of Hoffman's death, the entire amount of the Hoffman estate greater than the exemption amount is subject to estate tax (i.e. $35MM - $5.34MM, or approximately $30MM). With an estate tax rate of 40%, the resulting estate tax liability on the Hoffman estate is approximately $12MM (i.e. 40% of $30MM). If Hoffman and O'Donnell would have been married, there would have been NO tax after Hoffman died.

In a complete analysis, we would also have to consider the tax impacts upon O'Donnell's death. However, it is safe to say that not being married cost the Hoffman estate dearly in estate taxes.

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