Avoid These 13 Estate Mistakes (Even Smart People Make)
Even intelligent, responsible people can make critical errors when it comes to estate planning. These missteps can derail your legacy and create headaches for your heirs. Avoid these 13 common estate planning mistakes:
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Procrastinating or Failing to Plan: The biggest mistake is not having an estate plan at all. Without a will or trust, state laws decide who inherits, which may not align with your wishes. Don’t put it off. Create your estate plan while you’re of sound mind and update it as needed.
Not Updating Your Plan: Life events like marriage, divorce, births, or deaths can render your plan outdated. Many people forget to update wills, trusts, and beneficiaries after major changes, potentially leaving assets to the wrong person. Regularly review your documents (at least every few years) to keep them current.
Outdated Beneficiary Designations: Even if your will is up-to-date, old beneficiary forms on life insurance or retirement accounts can override it. Ensure all IRAs, 401(k)s, insurance policies, and annuities have the correct beneficiaries named and include contingent (secondary) beneficiaries too.
Naming Only One Beneficiary or Executor: Relying on a single person (like one child) as beneficiary or executor is risky. If that person predeceases you or can’t serve, your estate could face complications. Always name backup beneficiaries and successor executors/trustees in case the primary can’t serve.
No Incapacity Plan (Power of Attorney): Estate planning isn’t just about death – it’s also for incapacity. Failing to assign a Power of Attorney for finances and healthcare directives means no one can legally make decisions if you’re incapacitated. Include these documents so someone you trust can manage your affairs if needed.
Forgetting Final Arrangements: Many people don’t document their wishes for funeral and burial/ cremation. This can leave family guessing or disagreeing. Include a letter of instruction for your final arrangements and ensure funds are set aside to cover those expenses.
Ignoring Digital Assets: In today’s world, digital assets (online accounts, passwords, photos, cryptocurrency, etc.) are part of your estate. Not leaving instructions or access to your digital life is a mistake. Keep a secure list of digital accounts and logins, or use a digital vault, so your executor can manage or memorialize them according to your wishes.
Not Discussing Your Plan with Family: While your will can be private, completely surprising your family can lead to disputes or hurt feelings. If possible, communicate key aspects of your plan to heirs (at least let them know you have a plan and where documents are). Managing expectations now can prevent conflicts later.
Being Too Specific or Rigid: Oddly, the opposite of not communicating can also be an issue. Some folks leave overly detailed instructions or conditions (“Johnny must graduate college to inherit,” etc.).
Unreasonable or highly specific conditions can cause legal battles or may not be enforceable. Aim for clarity but avoid over-complicating your bequests.
Not Funding Your Trust: Establishing a revocable living trust can avoid probate, but only if you transfer assets into the trust. A common mistake is creating a trust and then failing to retitle accounts or property into it. Make sure any trust you set up is properly funded with the intended assets.
Forgetting About Taxes: Even smart people overlook estate tax or income tax implications. Large estates may face federal or state estate taxes. Even if your estate isn’t taxable, your heirs might owe income tax on things like retirement accounts. Incorporate tax-efficient strategies (like trusts, gifting, or charitable bequests) to minimize the tax bite on your legacy.
Poor Document Storage: An excellent estate plan means nothing if no one can find your documents. Don’t stash your will in a secret spot and forget to tell anyone. Store documents safely (fireproof home safe or with your attorney) and ensure your executor knows how to access them.
Updating Too Infrequently: Change is constant – family circumstances, asset values, and laws evolve. An estate plan from 20 years ago might be dangerously out of date. Review your estate plan regularly, and especially after any major life change or law change, to keep it effective.
Avoiding these mistakes will help ensure your legacy is protected and your loved ones are cared for as you intend. Estate planning can be complex, but you don’t have to navigate it alone. To make sure your plan is airtight, schedule an in-depth consultation with Legasure today. We’ll help you review your estate strategy and avoid the pitfalls that even the smartest people can make. Schedule your consultation here.
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