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Potential tax issues with Phillip Seymour Hoffman's estate

Phillip Seymour Hoffman has been laid to rest. Now the speculation begins about how his estate will be divided.  As we highlighted in a prior post, Hoffman was not married, even though he and longtime girlfriend Marianna O’Connell have three children together; two daughters and a son. Also, Hoffman’s estate is rumored to be worth upwards of $35 million.

While it is speculated that that Hoffman will leave a bulk of his estate to O’Connell, she may not be able to take advantage of the estate tax exemptions afforded to married couples. Federal law allows spouses to transfer unlimited amounts of property, money and other assets in their wills without any estate taxes applying. For those who are not married, the estate tax exemption only applies to the first $5.25 million of the value of the estate. After that, the applicable tax can be as much as 40 percent. 

Also, since Hoffman was a resident of the state of New York, his is estate may be subject to the state’s estate tax, which could add another 15 percent tax. (It is worth noting that the state of Texas does not have an estate tax, or an inheritance tax). All told Hoffman’s estate could be subject to more than $15 million in taxes.

With so much potentially going to Uncle Sam, it is important for those with potentially large estates to find experienced estate planning lawyers who understand the ways estates could be taxed, and ways to pass on property so that taxes can be avoided. 

Source: Forbes.com “Phillip Seymour Hoffman’s will raises problems,” Deborah Jacobs, Feb. 20, 2014

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