5 Common Estate Planning Mistakes to Avoid

Overlooking an important step or making a blunder can derail all your careful planning, leaving your heirs and beneficiaries with a headache-inducing challenge.

A man holds his temples like he has a bad headache.
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It goes without saying that everyone should have an estate plan. Whether you write out a simple will or work with a probate specialist to create a detailed and elaborate trust, the more thought and care you put into your plans, the better the outcome will be for your heirs and beneficiaries.

But if you overlook an important step or make a misstep, all your care and planning could be undone. You could instead saddle your next of kin with a challenging and headache-inducing estate.

There are many ways to get things wrong, but these are the most common mistakes I have seen in my practice.

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1. Failing to prepare for incapacity.

The main reason we create wills and trusts is because we know that we will someday die. We want our survivors to know how to distribute our property and other assets. But what happens if we become incapacitated? Will our loved ones know how we want our things handled?

It is easy to forget that events other than death can deprive us of our decision-making ability. A well-thought-out estate plan should also address these types of events. It should identify the people authorized to make important decisions on your behalf – regarding finances, health care and other critical matters – and include powers of attorney to enable them to do so. Once you are unconscious or afflicted with dementia, it will be too late. Make a list of decision-makers now, communicate your wishes to them and create the necessary powers of attorney.

2. Not including funeral and burial wishes.

If you had the foresight and means to purchase a burial plot and make funeral plans, state as much in your estate documents. Don’t leave it to your children to search for that information. If you have not made such plans, you should write your wishes into your will or trust. Failure to do this will leave your family with a lot to work out after your death.

Don’t assume that your executor will be the one making these decisions. Delegate a point person who will be in charge of the funeral and burial arrangements and make sure that person understands your wishes. If you fail to spell out your directives prior to your death, it may become an issue to be resolved in the probate court – which could significantly delay your being laid to rest.

The laws governing burial vary from state to state. In my home state of Texas, funeral decisions must be authorized by next-of-kin regardless of who you name as executor. For example, a dead person survived by children cannot be cremated unless all of those children agree. Educate yourself about the laws applicable where you live and take steps now to prevent interfamilial contention.

3. Not considering tax implications of transferring property.

Death and taxes may be inevitable, but taxes following a death are not. As generous as it may seem to gift property to your heirs during your lifetime, it is usually much smarter – and far more generous – to delay the transfer until you’re deceased.

When you convey the deed to property to your next of kin before you die, they may face a hefty tax bill whenever they sell the same property. This is because the basis for that house or ranch or condo will be tagged to the date on which you made your purchase, not the date when you made your gift. This could, therefore, leave your heirs scrambling to pay an enormous sum that would have been averted had they been granted the deed after your death.

4. Not naming backups for decision-makers.

The best of plans can go awry when tragedy strikes. If you and your spouse perish in the same accident, fire or natural disaster, you’d better have made provision for a secondary beneficiary. Have a contingency plan to address such unforeseen, and unfortunate, occurrences and name additional/alternative beneficiaries.

Name backups for your executor and other decision-makers. If they cannot fulfill their obligations – because of death, incapacity or other circumstance – a court will name substitutes unless you’ve already planned for these contingencies.

Take care of this early and handle it thoughtfully. It is much easier to prepare for the unknown while you are still of healthy body and sound mind. 

5. Not keeping track of beneficiary designations.

How an estate is divided among beneficiaries can seem straightforward, but it can be complicated. Imagine, for example, an individual who wishes to convey equal shares to all of his children. The will may actually state that each child gets a set percentage.

If, however, one child has been added as a beneficiary on death to a bank account in an oversight or other capacity, the child will be the sole beneficiary of the account, regardless of the will.

Therefore, in addition to enumerating the beneficiaries and their respective shares in your will, you must also communicate a directive to your bank that sets forth the interests in your account after your death. If you fail to do this, the bank’s rules will override anything you’re written in your will as to that account — leaving your total estate passing in percentages different from those expressed in your will.

Take Steps Now

All of the mistakes we’ve reviewed can be addressed early in the planning process.

Take appropriate steps now to ensure that there are no hidden gremlins that will haunt the people you love after you have passed.

Jack Hales (opens in new tab) is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization and primarily practices probate, estate planning, and small business formation and management.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC (opens in new tab) or with FINRA (opens in new tab).

Jack R. Hales Jr., J.D.
Founder and Partner, Hales & Sellers PLLC

Jack Hales is a founding partner at Hales & Sellers PLLC (opens in new tab) and is board-certified in Estate Planning and Probate Law. Hales primarily focuses on areas of estate planning and probate, including representation of executors, fiduciaries and beneficiaries in uncontested and contested estate and trust matters.