Common Estate Planning Mistakes Families Often Make

Most people know they should have an estate plan. Fewer actually sit down and make one, and many of those who do end up with documents that don’t hold up when their family needs them most. We see it all the time. A will signed decades ago, a beneficiary form nobody remembered, a trust that was drafted but never used.

The good news is that most of these problems can be avoided. Our friends at Felt Family Law and Mediation discuss how an estate planning lawyer can help families catch small oversights before they turn into expensive, stressful disputes, and we agree with much of that approach. Below are the mistakes we come across most often, along with a few thoughts on how to sidestep them.

Waiting Until Life Forces the Issue

Planning feels uncomfortable. It means thinking about illness, aging, and death, so many people push it off until they’re older or until something changes. The trouble is that accidents and sudden health problems don’t follow a schedule.

A plan made during a calm stretch of life is almost always better than one put together in a hospital room. And if someone loses the ability to make decisions before signing anything, it may simply be too late.

Assuming a Will Covers Everything

A will matters. But it doesn’t control every asset you own, and that surprises a lot of people. Several common assets pass outside of a will entirely:

• Life insurance policies with named beneficiaries
• Retirement accounts such as 401(k)s and IRAs
• Bank accounts with payable-on-death designations
• Property owned jointly with right of survivorship

When a beneficiary designation conflicts with the will, the designation usually wins. So a carefully written will can be undercut by a form you filled out years ago at a new job.

Forgetting to Update Beneficiary Designations

This one is closely related. We’ve seen ex-spouses inherit retirement accounts because no one changed the paperwork after a divorce. It happens more than you’d think.

Any major life event is a good reason to review your designations. That includes marriage, divorce, the birth or adoption of a child, and the death of someone you had named.

Leaving Out Incapacity Planning

Estate planning isn’t only about what happens after you die. It’s also about who can step in if you’re alive but unable to manage your own affairs.

A durable power of attorney and a healthcare directive let you choose those people ahead of time. Without them, your family may have to ask a court to appoint a guardian or conservator, which takes time and money and removes the decision from your hands.

Creating a Trust and Never Funding It

A trust only controls the assets that are actually placed into it. We’re often asked to review plans where someone paid for a well-drafted trust and then never retitled their home or moved their accounts. Those assets may end up in probate anyway, which is usually the very thing the trust was meant to avoid.

Keeping Your Family in the Dark

You don’t need to share every financial detail. Still, your executor should know they’ve been named, and someone you trust should know where your documents are kept. Surprises after a death tend to create suspicion and conflict, even in close families.

Relying on Generic Online Forms

Do-it-yourself templates can work for very simple situations. But they don’t ask follow-up questions, and they can’t spot problems. A missed signature or witness requirement can invalidate a document. Blended families, minor children, business interests, or a loved one with special needs all call for more careful planning than a fill-in-the-blank form can offer.

Treating the Plan as a One-Time Task

An estate plan is not something you sign and forget. Your family changes. Your finances change. The rules that apply to your plan can change too. We generally suggest reviewing your documents every few years and after any major life event, so the plan still reflects what you actually want.

If you have questions about an existing plan, or you’ve been meaning to start one and aren’t sure where to begin, consider taking the time to connect with an attorney who can look at your situation and walk you through your options.