The Biggest Mistakes When Estate Planning

When it comes time to plan your estate, not all strategies work for everyone, nor is there a one-size-fits-all plan. Without some sort of guidance in estate planning, it’s easy to make mistakes in important decisions that could have huge ramifications on your family’s financial future. 

Today, I’m covering some of the biggest mistakes I see in estate planning and how to avoid them.

Mistake #1: Only having a will

Most people believe that having a will is the extent of estate planning, and that’s all they end up planning for.

But even with a detailed and current will, the estate will still go through probate.

Mistake #2: Not having a trust in your estate plan

A trust is a legal agreement that sets out terms for property held by one person for the benefit of someone else.

For an individual wanting to make easy changes to the trust and move assets into and out of it, a revocable trust is the best option.

Because of this simple adaptability, revocable trusts may not be protected from lawsuits even though they do avoid probate.

Mistake #3: Not funding the trust

When a trust is created, there is one big mistake that people tend to make and that’s not funding the trust as outlined in the documents.

This should include your bank accounts, brokerage accounts, house, and other assets being held in the name of the trust, with the trust named as the life insurance beneficiary.

For retirement accounts, the primary beneficiary should be the spouse with the trust as contingent beneficiary.

Mistake #4: Not incorporating taxes in your estate planning

Currently, an estate tax exemption allows $11.58 million (double for married couples) to be exempt from the tax, but anything over that amount will be subject to estate taxes which run between 18% to 40%.

But in 2025, and with the new tax initiatives under the Biden administration, it’s likely that future exemptions will be lower.

Give us a call and we can create a solid plan for you to make sure that your estate taxes are minimized and you have a solid strategy for your estate.

Related: The Most Asked Questions about Taxes in Retirement

Mistake #5: Not having a healthcare proxy and power of attorney in your estate plan

Should the situation arise where an individual is unable to communicate while requiring medical treatment, if the individual has not established a health care proxy, their family has no authority to make decisions on their behalf.

Also, in the case of an individual being incapacitated, there may be decisions other than medical ones that need to be made.

A power of attorney is a legal document giving another person authority to make financial decisions on another individual’s behalf. 

Mistake #6: Not incorporating income tax planning for beneficiaries

Inherited assets can also result in more income taxes for beneficiaries, as adult beneficiaries must take annual RMDs from inherited IRAs and 401(k)s.

For those with high net worth, including physicians, tax strategies like second-to-die life insurance policies or Roth IRA conversions may help minimize the income tax burden on beneficiaries.

Related: Roth IRA Versus Traditional IRA

Don’t fall victim to these Common Mistakes in Estate Planning

With this many mistakes listed as “common,” it’s easy to see how very important estate planning is and why it’s one of the most neglected aspects of financial planning

Between the inability to predict the future and the complicated nature of the process, many families continue pushing this off over and over and over. 

As a fiduciary financial advisor, I’m able to take a 360-degree angle look at a financial plan to make sure that estate planning is not only included but done properly with even the most unexpected future in mind.

If you feel you need to prepare more for the future or reexamine your existing estate planning strategy, I’d love to set up some time to chat. 

We’re happy to work with you either in person, over the phone, or virtually, based on your preference. Give our office a call and we can schedule some time together.