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Taxes may become an estate planning issue for unmarried couples

Estate planning is not often an item that California readers see in the headlines, except for when an estate planning issue with a celebrity or other public figure makes the news. We can learn a lot from these examples about what sorts of contingencies to plan for and what sorts of unexpected issues may come up.

One recent case that has been in the news is that of the late actor Phillip Seymour Hoffman, who passed away unexpectedly earlier this year. He was survived by his longtime partner and their three children to whom he left the estate in varying proportions. The big issue that many people are noticing in this case is that Hoffman and his partner never married which means that she will not be able to claim the marital estate tax exemption.

Without access to this exemption on the state or federal level, as much as 40 percent of Hoffman's estate after the basic gift tax exemption of $5.34 million. For someone with ongoing income from currently released films and other projects, Mr. Hoffman will likely have an estate that reaches the top tax brackets. Even for those families who do not have the same level of assets and income as an actor, planning properly for estate taxes and taking these issues into account early is a part of overall prudent financial planning. This includes factoring tax issues into important decisions like whether to marry a longtime partner or co-parent. Marriage not only has tax benefits for a spouse, but it also serves to protect them and guarantee and inheritance in the event that a will or a portion of a will is invalidated. 

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

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