While creating your Estate Plan is important, creating one that avoids common pitfalls and mistakes is essential! After all, you don't want to go through all the time it takes to create a plan to protect your loved ones, just to have it riddled with errors that end up causing them stress and headaches in the end.
Making sure you’re aware of common Estate Planning mistakes means you’ll be more likely to avoid them. So whether you’re creating your first plan ever, or you’re updating an existing one, get familiar with what can trip you up, so you can write a flawless plan that accomplishes exactly what you envision while you safeguard your legacy.
The 13 Most Common Estate Planning Mistakes
Since it can be easy to overlook certain things when writing an Estate Plan, we put together this guide for you. It sheds light on the most common Estate Planning mistakes out there, which include:
1. Failing to Plan
The biggest mistake you can possibly make when it comes to your Estate Plan is simply not making the time to do it. Unfortunately, it’s something too many of us put off - but failing to prioritize your Estate Plan, or not ensuring it’s complete, ultimately means you’re risking the financial future of your estate, your legacy and most importantly, your loved ones.
The Fix: If you haven’t yet started your Estate Plan (or if it’s been more than five years since you’ve updated it, or if you’ve recently had a major life event), take the time to sit down and either get started or review your plan.
2. Not Discussing with Family and Friends
Of course there are exceptions to this rule, but if possible, it’s usually a good idea to have even a brief conversation with your friends and family. Setting expectations now, where there is an opportunity for discussion if needed, could lessen the likelihood that there is any contention or disagreement after your passing. If this isn’t an option, there’s language you can write into parts of your Estate Plan that specify anyone who contests anything could be written out.
The Fix: Set aside time in advance to discuss your Estate Plan with your spouse or anyone you’ve named Executor or Trustee, and think about notifying specific people you name in your Will or Trust.
3. Naming Just One Beneficiary
You should always have more than one beneficiary designated for any of your assets. In the event that a beneficiary passes away before you do, you’ll want to have what’s known as a contingent beneficiary. This is who would be next in line to your estate or any given asset. Ideally, you should have more than one contingent beneficiary listed.
The Fix: For each asset, account or policy, be sure to list a primary and one or more contingent beneficiaries.
4. Forgetting about Power of Attorney or Healthcare Representatives
Naming a Power of Attorney (either medical or financial) and/or a Healthcare Proxy is important, as these are the people who would step in to make decisions should you become incapacitated. Note that in most cases, these roles dissolve upon your passing.
The Fix: If your Living Will doesn’t designate a Power of Attorney or a Healthcare Proxy, make sure you have standalone documents that appoint a trusted person or people to make important financial and medical decisions for you.
5. Forgetting about Final Arrangements
Your loved ones will be grieving after you pass away, but planning in advance what you’d like to have happen (in terms of your funeral or burial arrangements) can be a blessing for those you leave behind. Another important component to this is making sure your wishes for end of life care are known (i.e. hospice, assisted living, etc.).
The Fix: Think about how you’d like your life celebrated and what type of funeral, memorial or burial you want. Put that in writing so your loved ones know exactly what they can do to honor you. Likewise, end-of-life planning documents can be included in your Estate Plan too. All of this both ensures your final wishes will be respected while alleviating just a little bit of stress for those grieving your loss or struggling to know what you would want.
6. Forgetting about Your Digital Assets
The idea of Digital Estate Planning is relatively new, but it makes sense, given the technological world we live in. Be sure to include a Digital Estate Plan that lays out how you’d like all your digital assets to be handled after you pass away. This could be anything from social media accounts, to online banking, to email accounts and more.
The Fix: Part of your Estate Planning should absolutely include a Digital Estate Plan. Just like you do in other parts of your plan, you’ll want to name a Digital Executor who can ensure all your digital assets are handled properly.
7. Forgetting about Charities that are Important to You
Particularly if you have a large estate, but even if you don’t have incredible wealth, you can still allocate some of your assets to benefit a charity that’s important to you.
The Fix: There are multiple ways you can leave parts of your estate to charities. Including the gift you want to bestow in your Estate Plan is one way to make sure your wishes are honored. Or, you can name a charity as beneficiary of an asset - like the proceeds from an investment or life insurance policy. You can read more about Naming a Charity as a Beneficiary in our guide.
8. Not Thinking about Your Children’s Futures
While your directions may be well-intentioned, there are cases where how you word things could come back to haunt your children or heirs. If your children are very young, you may want to include directions for how their guardian should spend assets, either to take care of them, or to benefit them in other ways.
Other missteps could include assuming your children will want something, when in fact they may not. For example, you might intend on passing down a vacation home that’s been in your family for generations, with the stipulation that it could only be sold if every child is married with their own vacation home. But what happens if one of the children doesn’t want to get married? Or doesn’t want to be a homeowner? In these cases, substantial legal fees and devaluation of an asset could affect the overall size of your estate as heirs go through the courts to gain allowances.
The Fix: It’s always best to leave specific guidance on how you’d want inheritances passed on to minors. Should it be based on age? Marital status? Graduation from college? And of course, think very carefully about how you word any stipulations on an inheritance. If you're not quite ready to start your Will or Trust, Trust & Will allows you to
for your children for just $39.
9. Getting Too Specific
We normally advise you to be as specific as possible when writing your Estate Plan. However, there is one caveat to that. You may own assets at one point in life that you might not necessarily have in the future. Are you putting stocks in your plan? Real estate? Season tickets to your favorite sports team? Are these all things you’re guaranteed to have decades from now?
The Fix: One way to avoid complications from being too specific actually just stems from Estate Plan management best practices. Review (and update if needed) your Estate Plan every three to five years, or anytime you have a major life event. If you sell a house that was in an original Estate Plan document, be sure to revise as soon as possible.
10. Improperly Funding Your Trust
A Trust is an excellent component to have in virtually any Estate Plan - but it could all be for naught if you don’t properly fund it. Creating a Trust is only half the battle; it’s useless until it’s actually funded.
The Fix: Follow all the steps to funding your Trust and be sure you know exactly what you need to do. This includes everything from how to title your assets, to how to get your taxpayer identification number (TIN), to how to handle your personal property and assets that don’t have titles versus those that do, and much more.
Read our How to Fund a Trust Guide for a comprehensive list of everything you need to do (and how to do it!).
11. Forgetting about Taxes
Estate tax liability can put a huge dent in what you plan on leaving your beneficiaries. In addition to your estate owing taxes before beneficiaries are paid out, you also want to think about how your gifts will impact individual heirs, too.
The Fix: Most often, estate tax liability isn’t going to be a huge problem. Unless you have a very large estate ($11.58m per person or $22.36m per couple), your estate will not be taxed at the federal level. Keep in mind though, in not too many years, unless an extension is put into place, the law will revert back to the former $5 million exemption limit. Additionally, you should know if the state you and your beneficiaries live in has a state estate tax, and understand what the limits are before you write your Will or Trust.
12. Not Securing Your Estate Plan
Having the best Estate Plan in the world won’t accomplish anything if your heirs can’t find it. Think twice before putting your plan into a safety deposit box - it can become complicated when your loved ones try to gain access after you pass away. But you do want to keep all of your Estate Planning documents together and in a safe place.
The Fix: Storing your Estate Plans in a fireproof safe or in what’s known as a
is a great idea. Don’t forget to let your spouse or another trusted family member or friend know where this is located.
13. Updating Your Plan Too Infrequently
Unfortunately, Estate Planning is not a set-it-and-forget it deal. You need to keep it current, and make sure it reflects all of your life changes as they come. As we mentioned earlier, any major life event could be cause for an update - this could include a marriage, divorce, birth of a child or death of a family member or beneficiary.
The Fix: In addition to updating your Estate Plans after any major life event, it’s worth mentioning again how important it is to do a general review every three to five years (even if no major life events have occurred).
Creating an Estate Plan is one of the most generous things you can do for your family and loved ones. But don’t let your good intentions fall to the wayside because you make any of these unintentional Estate Planning mistakes. Is there something we missed? Reach out to us today or Chat with a live member support representative!
Ready to set up your Estate Plan the right way? Trust & Will is here to help! We have both Will-Based and Trust-Based Plans designed to help meet your needs regardless of your situation or stage of life. Discover which option is right for you by taking our simple quiz.