Estate planning mistakes can upend your best efforts to protect your family’s finances after your death. Everyone can benefit from learning about estate planning, a process that entails getting your financial affairs in order so that your assets and possessions get passed on to the people or organizations you want to inherit them.
Having a comprehensive estate plan in 2025 will also spare your heirs the pain and expense of determining how to allocate your money and property while they’re grieving the loss of a loved one.
While you may feel an estate plan is unnecessary because you lack sufficient assets to pass along to your family, it isn’t all about the money. A complete estate plan aslo details your medical dricetives if you become incapacitated and can also drastically reduce the potential for family disagreements no matter how much money is involved
Waiting until later in life reduces your abliity to make long term plans while you are healthy and of sound mind. If you fail to plan state law will decide how your assets or distributed. In the worst case scenario your entire estate can go to the state. This is why it’s important to make an estate plan now, and why everyone of all income levels and walks of life ,should have an estate plan.
Here’s a closer look at several common estate planning blunders, most of which are easily avoided.
Estate planning mistake: Procrastinating on Making an Estate plan
Estate planning is a financial priority, but it is not exactly a walk in the park.
People usually do not contemplate their own mortality, we do not like to think about end of life preparations. Younger individuals feel it is unnecessary to execute wills and powers of attorney documents because they are the sole domain of the elderly.
Many Americans delay drafting the legal documents necessary to protect themselves and their loved ones
More than half of Americans do not have a will. Just 33 percent of U.S. adults have estate planning documents, such as a will or living trust.With more than half of them believing they do not have enough assets to justify an estate plan.
However, The consequences of dying intestate, which means dying without a will, can be dire. Without estate planning documents such as a wills, trust, or beneficiary designations, the courts will decide how best to divvy up your assets, which may not reflect your intent.
Failure to do estate planning is a common mistake for parents. If parents do not name a legal guardian for their minor children they may be putting their kids’ future at risk.
A basic estate plan should include a will, a financial power of attorney ( which identifies the individual you would like to make financial decisions on your behalf should you become too ill or incapacitated) a healthcare directive, (which outlines your preferences for end-of-life medical care). These documents ensure your wishes are carried out and also relieve your loved ones of trying to guess what you would have wanted — a common source of family infighting.
Estate planning mistake: Failing to Update Outdated Wills and Trusts.
If you made a will 20 years ago, but haven’t touched it since, chances are it is out of date. Estate planning documents are not a “set it and forget it” solution. State and Federal Laws are constantly changing. A plan made in 1990 should be reviewed and updated to ensure their wishes will be honored under the current laws.
We advise clients to review their estate planning documents and beneficiary forms every couple of years. Especially if their family experienced a major change such as: a birth, death, divorce, or marriage.
If you move to another state review your estate plan to ensure that your current plan will not leave assets subject to probate under the laws of your new home.
It is Best practice is to update your will every five to seven years, and your health care power of attorney and financial power of attorney every three years.
There are many reasons why you may need to update your estate plan, if your assets are worth dramatically more now than they once were or that you need to change your beneficiaries. Perhaps one of your kids has special needs so you want to leave your assets in a special needs trust.”
Estate planning mistake:
Failing to Designate Beneficiaries for Pay on Death accounts
A common mistake is to change the will, but fail to update the beneficiaries of their retirement accounts (IRAs and 401(k)s), life insurance policies, and annuities, which are often the largest assets in their estate.
Beneficiary designations on financial accounts are legally binding documents, which supersede whatever is stated in your will.
For example, If you change your will after a divorce, but forget to update your IRA beneficiary designation, that asset would still go to your ex-spouse (or his or her heirs) when you die.
A couple may set up a trust for their young children, but they had a life insurance policy issued before they had kids and the designated beneficiary to that policy was their mom or dad. Many people often don’t realize that beneficiary designations take priority over their wills. Or they forget to update their beneficiaries when their life circumstances change
Estate planning mistake:
Failing to Title Your Assets Into Your Trust
Trust accounts serve many roles. They can help protect assets from creditors, they ensure your estate gets distributed to your heirs in the timeframe and manner you desire, and they keep details of your financial affairs private — including your assets, debts, and designated heirs.
Yet many of our former clients return to our office 10 or twenty years after the original trust was drafted and we find they still have not titled their assets in the name of the trust. Even though they where explicitly directed to do so when the trust was drafted.
A Trusts cannot accomplish its intended purpose if you fail to move assets into the name of the trustt, including real estate, stocks, cash, or mutual funds.
Most often people will buy property after they create their trust and forget to title them in the name of the trust, which means those assets will still have to go through probate. Though it is possible to have these assets placed into the trust after death if the trust documents show that the assets was supposed to be owned by the trust. (See 850 Petitions)
In California, People of all income levels use a trust as a means of avoiding Probate. Probate is the costly and time consuming legal process of distributing your will after you die.
While wills are public documents, trusts are not.
Once a will is filed with the probate court, it becomes public record so anyone interested (think disinherited heirs and nosey neighbors) can request a copy.
5.Estate planning mistake:
Failing to Plan around the estate tax with life insurance.
Wealthy individuals who die while maintaining ownership of their life insurance policy could inadvertently create a taxable event for their heirs.
While life insurance death benefits are not subject to federal or state income taxes, proceeds may still be subject to estate tax if the insured had any “incidents of ownership” when he or she died.
Only the portion of one’s estate that exceeds the federal estate exemption limit, which is $12.92 million per person in 2023 ($25.8 million for married couples), would be subject to the 40 percent federal estate tax. (Note: the exemption is only available to U.S. citizens and permanent residents at the time of death and your state may have a separate state estate tax and a different exemption amount).
$20 million life insurance policy could be removed from the estate if it was gifted to an irrevocable life insurance trust. But, if the individual owns it at the time of their death the proceeds may be includable in your taxable estate.
Another example of the potential life insurance pitfall: when a wife is named the outright beneficiary of her husband’s life insurance policy. The proceeds would generally not be taxable to his wife upon receipt (life insurance proceeds are usually tax free to the beneficiary), but any remaining assets from the policy when she dies would be included in her taxable estate, which could increase the size of her taxable estate, potentially subjecting her estate to estate taxes at her death.
While the current estate tax exemption is high enough to prevent most beneficiaries from being subject to the estate tax it remains to be seen if the current government will extend the current 12 million cap which is set to expire at the end of 2025. The post expiration value would be $5 Million Dollars.
By using an irrevocable trust the surviving spouse could receive all of the income generated by the trust for her lifetime and any distributions of principal by the trustee for their ongoing health, education, maintenance or support.
Estate planning using trusts is complicated, however, and trusts must be structured carefully to provide proper protection. Always consult a qualified attorney for advice.
Estate planning mistake:
Naming your children as joint owners of your assets
Another estate planning no-no is to name your children as joint owners of your assets, which gives their creditors access to your money.
While you may view your children as very responsible individuals. They open your assets up to significant risk if they are joint owners of your accounts. For example if your child drives a car any everyone else on that road is a potential creditor.
A better option is to name your child your power of attorney and payable-on-death beneficiary to your bank or brokerage accounts, which allows him or her to access those accounts if needed during your lifetime but keeps those assets out of your child’s estate — and away from the hands of his or her creditors.
Our firm has delt with several clients who lost large sums of money because their child was named as a joint owner of their estate assets. For example, a parent could lose their life savings if their kids unsuccessful business venture defaults on a loan and the bank files a lien at the bank where the joint account is held.
To create a bulletproof estate plan you must plan properly
A Poorly planned ownership structure or a lack of proper documentation could result in a serious tax hit to your heirs, or deny your loved ones their rightful inheritance.
The leads us into the final common estate planning mistake
7.Estate planning mistake:
Selecting the Wrong People To Carry Out the Estate
Choosing the right executor of the estate, healthcare power of attorney, financial power of attorney, trustees, or guardians to carry out their legal obligations is an important decision. Often times clients look to family members to fill these important roles. Although family members can be trust worthy and capable people, you should be aware of each individual’s financial situations, their relationship with other family members, and the powers given to them under these documents. If your family members interpersonal relationships create to many complications you may consider hiring the third-party trustee. In conclusion, although family members may be capable and responsible persons for these roles visiting with an experienced estate planning attorney at Bassin law Can help.
8.Estate planning mistake:
Forgetting to Address Healthcare Issues
Another common mistake in estate planning is forgetting to include future healthcare wishes. Many people think that estate planning only addresses guardianship of minor children and the distribution of assets. However, a comprehensive estate plan should also address situations involving incapacitation or injury, either on a temporary or permanent basis. An estate plan should also specifically identify healthcare wishes through a living will, and appoint a healthcare power of attorney to a trusted family member or friend. Additionally, an estate plan should have a financial plan that works with government medical programs in California in order to protect both the health and finances of a person. Forgetting to address healthcare issues is a common mistake in estate planning that can result in catastrophic consequences.
9.Estate planning mistake:
Leaving loved ones uninformed
Be sure to share your estate plan with your family and other heirs to help prevent confusion, conflict, and unnecessary stress. Although the conversation can be difficult, it is important to sit down with the relevant people in your life and have an open conversation about your intentions while you still can. Be sure you explain to potential trustees and executors the duties they will duties and responsibilities of their roles. This will allow you to resolve any potential conflicts that may arise among you heirs after your death. Having these conversations allows for careful planning that will save your children from future conflict.
10.Estate planning mistake:Keeping estate planning documents locked up in a safe or safe deposit box or other secret place.
Estate documents kept tucked away in a seemingly secure place such as a safe in your home or under the floor board might be difficult to access. Instead, provide copies of your estate plan to your appointed executor , a trusted family member, and your estate lawyer. And make sure family members have contact information for each of these people. Failng to do so can void your entire estate plan if your heirs are unable to provide an original signed copy to the court.
11. Estate planning mistake:
Creating an Estate Plan Without the Legal Guidance of an Estate Planning Lawyer
Not consulting with an attorney is probably the biggest mistake of all, The internet has made do-it-yourself legal document drafting and services more common in recent years. Many decide to take on estate planning without speaking to a legal professional. Countless websites advertise low-cost legal services and documents conforming to federal and state laws.
According to the American Bar Association, replacing the guidance of an estate planning attorney with a legal website could possibly have many negative consequences. While many online services promise quality, legally binding documents, these document often fail to comply state regulations Several states have even filed lawsuits asserting that online legal service companies were engaging in unlawful practices. Furthermore, an experienced estate planning attorney is trained on the tax implications, strategies for avoiding probate, and how to protect your assets if you go into a nursing home.
Our estate attorneys offer free initial consultations and charge a flat fee for, drafting simple wills and trusts.
A seasoned estate planning attorney at Bassin Law can can help answer specific questions about estate planning.