Whether you’re rich, poor, single, or have a family, estate planning is necessary. Avoiding or neglecting the estate planning process in the present can cost you and your loved ones in unnecessary and expensive ways down the road.
Don’t Make These 10 Common Estate Planning Mistakes
Here are 10 common estate planning mistakes we ensure our clients avoid.
Not creating an estate plan of any kind
Many people mistakenly believe that estate planning is only for the rich or that you don’t need an estate plan if you don’t own property. This is not true. Estate planning is about far more than money and property inheritance.
Estate planning accounts for a wide range of situations, including:
- Who should make decisions for you if you are incapacitated (unconscious or unable to make medical and legal decisions for yourself?)
- Where will your minor children go to live if you are incapacitated or die unexpectedly?
- Taking care of any special needs children if you can no longer do so.
- Providing instructions around pet care.
- And so on.
There is far more to estate planning than who gets your money when you die.
DIY estate planning
Yes, you can technically do your own estate planning by writing your wishes down on a piece of paper and signing it (having a reputable adult witness is even better), or by using online forms. However, DIY estate plans rarely protect you the way they should.
Among other things, they:
- Are less likely to hold up in probate court if anyone legitimately contests your will.
- They may not include everything they should, leaving loved ones in the role of deciding for you – which is incredibly stressful.
- May not be reviewed as often as they should (see below) because there is nobody following up on them for you down the road.
- Can leave you or your heirs paying thousands – or tens of thousands – of dollars in unnecessary taxes, fees, or even penalties if they’re not created in alignment with current estate planning laws.
Estate planning fees are proportional to the size and needs of your estate, so we firmly believe that estate planning is for everyone – not just the rich!
Failing to plan for incapacity
Incapacity is not rare. All it takes is a fall down a flight of stairs or a car accident to render you unconscious or during a medical emergency that prohibits you from thinking or speaking for yourself. The recent pandemic also taught us how quickly an adult can go from “having a bad cold” to “being hospitalized with a respirator” in a matter of days.
When you successfully plan for incapacity, everything healthcare providers – and loved ones – need to know about you is accounted for. This includes things like:
- Creating your advanced medical directives.
- Choosing a healthcare proxy or power of attorney. You can choose one person to make medical and legal decisions – or you can designate different individuals for each role.
- Determining who you want to serve as your durable power of attorney (DPOA) to handle financial or legal decisions.
Not choosing guardians for minor children
If you have children, you absolutely must make some type of plan (and we also recommend a Plan B) that clearly outlines who will take care of your children if you are incapacitated or if you die unexpectedly. Failing to do so puts children in a vulnerable and emotionally fraught situation – especially if family members or other loved ones disagree about what’s best.
Failing to select beneficiaries for financial and investment accounts
Almost every financial, retirement, or investment account provides options for “beneficiary designation.” When an account holder dies, their beneficiaries fill out some legal forms and provide a copy (usually an official copy) of a death certificate.
You can select a single beneficiary per account, or you can determine multiple beneficiaries per account by percentages. This one step simplifies will and trust estate planning.
Not understanding the tax benefits of estate planning
If you own property or have a sizable estate, there’s a chance you and your heirs will miss out on significant tax benefits. Meeting with an estate attorney is the only way to truly understand taxes and trust distribution.
Regardless of whether you must pay taxes on your trust distributions, remember that a trust may protect you from greater tax responsibility. In fact, protecting heirs and beneficiaries from paying steep taxes is one of the main reasons most of our clients set up trusts or trust funds in the first place.
Honoring divorced and blended family dynamics
Estate planning for blended families is essential. First and foremost, clients frequently learn they forgot to remove their ex-spouse as a beneficiary from former life insurance policies or accounts – and beneficiary designations trump intestate succession. Depending on the family culture, this can become a nightmare for your current spouse and may leave them with far less than you thought you were.
Also, depending on the ages your stepchildren entered your life, there is a good chance they’ll be viewed as biological children if your estate moves into probate due to your lack of estate planning. In some cases, this may be what you’d want; in other cases, it’s not. Most remarried couples in blended families feel more secure by having a clear estate plan in place.
Failing to plan for your business
If you own your own business – no matter how small – it’s worth meeting with an estate planning or business attorney. We’ll ensure you put the correct steps in place to continue – or dissolve – the business if you die or cannot continue running it due to unforeseen circumstances.
Not telling the right people what they need to know
Estate planning can feel like a very vulnerable and sensitive process, which means most people keep it far more private than it should be. If family dynamics are complicated, that’s okay. It may be that a close friend, a trusted professional colleague, or your estate attorney are the only ones who know who gets what – or who makes the decisions – if you become incapacitated or die.
We highly recommend providing copies of your estate plan with key individuals that you trust – such as your POA, a loyal friend/family member, etc. And, of course, you don’t have to provide copies of your entire estate plan. Instead, share the most pertinent points – or just let them know you have an estate plan and provide your attorney’s contact information so they know where to turn.
Failing to perform annual estate planning reviews
An estate planning document is not a one-and-done (unless you die within weeks or months of creating it). Things change quickly. Even in a single year, changes in finances, careers, family members’ lives, divorces, remarriages, or deaths all impact an estate plan.
An out-of-date estate plan is at higher risk of being contested in court, which defeats the point of your hard work. Set an annual date to review your estate plan, and then connect with an estate planning attorney ASAP if you need to make changes.
Tseng Law Firm Ensures Clients Avoid Estate Planning Mistakes & Pitfalls
Ready to execute a comprehensive estate plan that’s mistake and error-free? Don’t put it off any longer! Schedule a consultation with Tseng Law Firm. We provide top-notch, competitively priced estate planning sessions for a diverse clientele. Not quite sure what you need – yet? Call us for a free discovery consultation ( (510) 835-3090), and we’ll steer you in the right direction.