10 Common Estate Planning Mistakes and How to Avoid Them

Estate planning is one of the most important steps you can take to ensure that your assets are distributed according to your wishes and that your loved ones are cared for after your passing. Yet, even with good intentions, mistakes in estate planning are surprisingly common. These missteps can lead to unnecessary delays, family disputes, or even financial losses. Below, we explore ten of the most frequent estate planning mistakes in detail, along with practical advice on how to avoid them.

1.Not Having an Estate Plan at All

Many people mistakenly believe that estate planning is only necessary for the wealthy or those nearing retirement. This assumption often leaves families unprepared and assets tied up in legal complications. When there’s no estate plan in place, the distribution of your assets will be determined by state intestacy laws, which might not align with your intentions.

To avoid this mistake, start your estate plan as soon as possible, regardless of your age or financial situation. At the very least, you should have these three essential documents:

• A Will: To specify how your assets should be distributed.
• Power of Attorney: To appoint someone to handle financial matters if you’re unable to do so.
• Advance Healthcare Directive: To outline your medical wishes if you’re incapacitated.

Proactively creating these documents ensures that your loved ones won’t face unnecessary stress or uncertainty during difficult times.

2.Failing to Update Your Estate Plan

Life is full of changes, and these changes often impact your estate planning needs. Events such as marriage, divorce, the birth of a child, or the death of a beneficiary can render your estate plan outdated or ineffective. For instance, failing to update beneficiary designations after a divorce could result in an ex-spouse inheriting assets.

To avoid this, review your estate plan regularly—ideally every three to five years—or after significant life events. This ensures your plan always reflects your current circumstances and intentions. Working with an attorney during these updates can also help you stay compliant with changing laws.

3.Overlooking Digital Assets

In the digital age, many people forget to account for their online presence when creating an estate plan. From social media accounts to cryptocurrency wallets and intellectual property, digital assets are an increasingly significant part of modern estates. However, without clear instructions, these assets can easily be overlooked or lost.

To address this, create an inventory of your digital assets. This list should include:

• Online accounts (e.g., social media, banking, email).
• Cryptocurrencies and digital wallets.
• Passwords and access credentials.

Store this information securely and consider naming a digital executor to manage your online presence and digital assets according to your wishes.

4.Naming the Wrong Executor or Trustee

Selecting the wrong person to act as your executor or trustee can create major problems. An executor or trustee who lacks the necessary skills, is disorganized, or unwilling to take on the responsibility can cause delays, disputes, and even financial losses for your beneficiaries.

To avoid this, choose someone trustworthy, organized, and capable of handling financial and legal matters. If no suitable family member or friend exists, consider appointing a professional fiduciary or corporate trustee to manage your estate.

5.Ignoring Estate Tax Implications

Failing to consider estate tax obligations can reduce the inheritance your beneficiaries receive. Federal and state taxes may apply to large estates, and without proper planning, these taxes can significantly impact your estate’s value.

For instance, in New York, estates valued at $6.58 million or more are subject to state estate taxes (as of 2024). While New Jersey doesn’t impose estate taxes, it does levy an inheritance tax on certain beneficiaries.

Work with an estate planning attorney to explore strategies like:

• Establishing Trusts: Such as irrevocable life insurance trusts or charitable trusts.
• Gifting: Transferring assets during your lifetime to reduce the taxable estate.

Taking proactive steps can help minimize tax liabilities and maximize what your beneficiaries receive.

6.Assuming a Will Covers Everything

A common misconception is that a will is sufficient to handle all estate matters. However, many assets—such as retirement accounts, life insurance policies, and jointly owned property—are distributed according to beneficiary designations or ownership agreements, not the terms of a will.

To avoid confusion, coordinate your will with other estate planning tools. For example:

• Ensure beneficiary designations on accounts match your intentions.
• Use trusts to manage complex assets or protect assets for minors.
• Confirm that joint ownership arrangements align with your overall plan.

By taking a holistic approach, you can ensure a seamless transfer of all your assets.

7.Not Properly Funding a Trust

Creating a trust is a powerful tool for managing and distributing your assets, but it’s only effective if properly funded. If you fail to transfer assets into the trust, they may still be subject to probate or unintentionally distributed through intestacy laws.

To avoid this mistake, retitle assets—such as real estate, bank accounts, and investment portfolios—in the name of the trust during your lifetime. Periodically review the trust to ensure all intended assets are included and update it as necessary.

8.Neglecting to Plan for Incapacity

Estate planning isn’t just about what happens after your death; it’s also about preparing for scenarios where you’re unable to make decisions for yourself. Neglecting to include incapacity planning can leave you vulnerable and force your family to make difficult decisions without clear guidance.

Include the following in your estate plan:

• Durable Power of Attorney: Appoints someone to handle financial matters if you’re incapacitated.
• Advance Healthcare Directive: Outlines your medical wishes and designates a healthcare proxy.

Planning for incapacity provides peace of mind, knowing that your wishes will be followed even if you can’t express them.

9.Forgetting About Long-Term Care Costs

Long-term care expenses, such as nursing home fees, can quickly deplete your estate, leaving little for your beneficiaries. Many people fail to account for these costs, which can result in financial strain on loved ones.

To mitigate this risk, explore options like:

• Medicaid Planning: Work with an attorney to qualify for benefits while protecting assets.
• Long-Term Care Insurance: Helps cover expenses for nursing home or in-home care.
• Irrevocable Trusts: Shields certain assets from being used for long-term care costs.

Starting this planning early maximizes your options and preserves more of your estate for your heirs.

10.DIY Estate Planning

While it may be tempting to rely on online templates or self-written documents to save money, DIY estate planning often leads to errors, omissions, and complications. Every state has specific laws governing estate planning, and generic forms may not address your unique situation or comply with local regulations.

To avoid costly mistakes, work with an experienced estate planning attorney. They can ensure your documents are legally sound, comprehensive, and tailored to your needs.

Bonus Mistake: Not Communicating Your Plan

Even the most well-crafted estate plan can cause confusion or disputes if your loved ones don’t know about it. Failing to communicate your intentions can lead to misunderstandings or even legal battles among family members.

Have an open conversation with your family about your estate plan. Share the location of important documents with your executor or trustee to ensure they can be easily accessed when needed.

How to Avoid Estate Planning Mistakes

1. Work with Professionals: An attorney and financial advisor can provide guidance tailored to your situation.
2. Keep Records Organized: Maintain an inventory of assets, liabilities, and important documents.
3. Review Regularly: Schedule periodic reviews to address changes in your circumstances or the law.

Estate planning is essential to protecting your assets and ensuring your wishes are honored. By avoiding these common mistakes and seeking professional guidance, you can create a comprehensive plan that provides peace of mind for you and your loved ones.

If you’re ready to start or update your estate plan, our experienced attorneys in New York and New Jersey are here to help. Contact us today for personalized guidance and expert support.

Mitchell C. Beinhaker, Esq. is a business lawyer and estates attorney who runs a solo legal & consulting practice representing business owners, entrepreneurs, executives, and professionals. Through his 30+ years of experience, Mitchell has handled business development, marketing, firm management, along with business transactional work for clients of the firm. He has extensive experience with corporate governance, commercial transactions, real estate, and risk analysis. Using his years of practical experience, he drafts contracts, negotiates purchases, and can manage outside counsel for any corporate situation. For business owners and executives, he creates and implements estate plans, along with succession plans to help companies continue for future generations. 

Mitchell is the co-author of 10 Ways to Get Sued by Anyone & Everyone:  the small business owners guide to staying out of court, available in paperback and kindle from Amazon.

If you need legal help with any of our services, contact our office for a free consultation.  You can email us at info@beinhakerlaw.com.  To learn more about Mitchell and his practice, visit beinhakerlaw.com.

Beinhaker Law and Mitchell C. Beinhaker, Esq. do not guarantee the accuracy of any information provided in this article.  Its not to be construed as advice of any kind.  Be sure to check with your local professionals before making any decisions.