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Learning from Philip Seymour Hoffman's estate plan

On the individual level, it may seem to many people that unexpected life events don't happen very often. After all, it's easy to go along with the flow of life and assume that regularity will always be the norm. The reality, though, is that unforeseen factors disrupt people's lives all the time, and your estate plan should account for unwanted surprises in order to protect yourself and your loved ones.

The recent death of actor Philip Seymour Hoffman sank the hearts of people around the world. His death was sudden, but even so, his will had reportedly not been updated since the birth of two of his children. Hoffman did create a trust for his eldest child and left the remainder of his fortune to his partner Mimi O'Donnell, but the actor's estate plan was far from comprehensive.

Trusts can be very effective tools for protecting and distributing assets after one's death, and Hoffman was wise to create a trust for his son. However, the actor's two daughters are apparently not named in the will, so it may be up to O'Donnell, the mother of the girls, to ensure that they receive a fair share of Hoffman's assets.

Estate planners would be smart not to leave such issues to question.

A trust is also useful in keeping family finances private. While a will is a public instrument subject to probate, the terms of a trust are typically kept out of public view. Hoffman's will named his son as a trust beneficiary, but the will stopped short of transferring all of the actor's assets into a trust.

In estate planning, we call a will that transfers all assets into a trust a "pour-over" will, but you have to take steps to draft and update documents to achieve that end. It is also important to alleviate loved ones of as many difficult decisions as possible, and a good way to do that is to update your estate plan any time your life situation changes.

Source: Daily Finance, "Philip Seymour Hoffman's 3 Biggest Estate Planning Mistakes," Dan Caplinger, Feb. 25, 2014

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