Earlier this week we discussed the tragic death of New York actor Philip Seymour Hoffman. There are many estate planning lessons to take away for Hoffman’s situation, including the need to update a will after every life event. Hoffman unintentionally left out two of his children by not updating his will to include them specifically–his oldest son is named directly as a beneficiary of a trust.
Yet another lesson that fellow New Yorkers can take from the case is the role that marriage can play in these matters.
Companions vs. Spouses
According to reports, the mother of Hoffman’s three children was long-time girlfriend Marianne O’Donnell. The couple was together for years, though they apparently were split in the few months before the death (allegedly as a result of Hoffman’s relapse). At no point was the couple married. This is not necessarily an unusual state of affairs for couples today. Due to many personal factors, even the most intimate partners with decades together may choose not to formalize that union by way of a marriage. In the eyes of the parties, their relationship is the same regardless of whether there is official government sanction or not.
However, it is important to remember that the law does not view all couples the same. In fact, the entire purpose of marriage is to classify couples into different camps with thousands of rights on the line. Those rights have clear estate planning implications.
Per the terms of Hoffman’s will the bulk of his suspected $35 million estate will go to O’Donnell. However, both New York State and the federal government impose an estate tax. Above the exemption amount, the tax can hit as high as 40%. Of critical importance, the tax does not apply to transfers between spouses. But Hoffman and O’Donnell were not married, and so she will likely be hit with an estimated estate burden of $15 million or more. A marriage would have eliminated 100% of that burden.
The bottom line is that in cases like this, marriage saves on taxes. There are many different situations where a transfer of wealth to another would be taxed except for transfers between spouses. While no one should make life decisions regarding marriage based entirely on taxes, one should not overlook the reality that marriage matters under the law.
Basic New York estate planning principles apply in virtually all cases, no matter if you have a $35 million estate or if your main asset is a family home. To ensure you take steps to protect your loved ones for the future, be sure to contact a NY estate planning attorney today.