Four Big Estate Planning Mistakes You’ll Want to Avoid

Despite the importance of estate planning, it’s easy to procrastinate or delay getting one put in place. But not having an estate plan can cause you to lose control of what happens to your assets, lead to paying unnecessary taxes, and can lead to significant family disputes or disagreements that end up in court.

An estate plan can help minimize taxes, provide peace of mind, and ensure that your assets, interests, and loved ones will be protected after you pass away. If you don’t have an estate plan, your family could face many hurdles that can be highly time-consuming before your assets get distributed.

Here’s a closer look at four big estate planning blunders (which can be easily avoided!)

Not having a plan in place

The biggest mistake we usually see is not having an estate plan in place. The Covid-19 pandemic seems to have increased Americans’ awareness of the need to have a will, trust, or estate plan in place. However, according to a new survey from, only 33% of Americans have one of these plans in place. That means that 67% leave what happens to them and their assets in case of disability or death up to others, including the state.

If you don’t have an estate plan, will, or trust in place, state succession laws and the probate process will help determine where your assets go. Do you want your state of residence and the court system to decide where your hard-earned assets go after you are gone? Most people do not!

Our recommendation:

Consider being proactive and schedule time with a financial advisor and an estate planner to start the estate planning process.

Not updating your plan throughout your life

Having an estate plan is great – but simply having a plan isn’t enough. As your life changes over the years, your estate plans need to be updated too.

Here is a list of significant life changes you may encounter that may warrant a review or update of your estate plan:

  • Getting married
  • Having children
  • Change in who you want to receive your assets (e.g., business, home, cabin, etc.)
  • Buying a house or making other large purchases
  • Moving to a different state
  • The size of your estate becomes taxable at the state or federal level
  • Getting a divorce (you or a child)
  • The death of a spouse
  • Opening new financial accounts
  • Changing jobs
  • A significant change in your income
  • You’ve inherited money

 Our recommendation:

Revisit your estate plan any time you experience a major life change. Even if you don’t have a major life event happen, it can be good to review your plan every three to five years.

Not considering the impact of taxes on your beneficiaries

Two types of taxes could impact your beneficiaries – estate taxes and income taxes. Federal estate tax liability won’t come into play most of the time unless you have a substantial estate (the current federal exemption is $12.06m per person or $24.12m per couple).

Note: The exemption is scheduled to revert to the previous $5 million exemption amount in 2026, indexed for inflation. Keep this in mind and discuss it with your financial advisor and estate planner.

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 estate plan

Certain assets left to heirs can create unintended income taxes for your beneficiaries from an income tax standpoint. For example, a 401(k) or IRA inherited by an adult child is currently subject to required minimum distributions (RMDs), which could be taxed. If your heir is a professional in peak earning years, the distribution will likely be taxed at the highest marginal tax rate. The RMD is taxed as ordinary income and stacks on top of an individual’s current earnings. Obviously, this isn’t ideal since it decreases the total wealth passed down.

Our recommendation:

Run a Roth conversion and wealth transfer analysis with your financial advisor. If you do a Roth conversion while living, your beneficiary could avoid income taxes upon withdrawal because, typically, Roth distributions are non-taxable. If your heirs may be in higher tax brackets than you are today, or if you have a taxable estate, it may make sense to convert before they receive the accounts.

Not considering a trust

Trust accounts serve many roles. They can help protect assets from creditors, preserve assets for your children in the event they get divorced, ensure your estate gets distributed to your heirs promptly, minimize taxes, and keep details of your financial affairs private. On the other hand, if you only have a will, it is probated, which means it’s legally validated in court. Probate is the time-consuming legal process of distributing your will after you die. Unfortunately, probate can be long, expensive, and your personal affairs become part of the public record. When you utilize a trust, you can avoid some of those risks.

Our recommendation:

Work with your financial advisor and attorney to determine if a trust could minimize your tax bill, give you more control over your estate after you’re gone, and protect your assets. Some trusts can be expensive to set up and maintain. Ask your attorney about the potential cost savings of adding trust provisions to your will.

Working with a financial advisor and estate planning law firm can help make creating an estate plan as painless and efficient as possible. When your estate plan is in place and kept up to date, you can have peace of mind that your interests and loved ones are protected in the future.

Contact us for a no-cost, 90-minute consultation if you would like to discuss your situation and what kind of estate plan is right for you.