Estate planning is the process of creating a blueprint for the preservation, management, and distribution of assets in the event of one’s death and/or mental incapacitation. Its goal is to maximize the value of your assets while ensuring a smooth transfer to heir(s)—the person (or people) set to inherit them.

Despite what some may think, estate planning isn’t only for the wealthy; if you own a bank account, car, furniture, or insurance policy, you have assets—however modest they are. It’s therefore crucial to plan for asset distribution upon your death, as a failure to do so will go down as a huge mistake. Irrespective of where you are in the process, you’ll want to avoid these common estate planning blunders so your heirs can save time and money and avoid disputes that ultimately lead to unresolved friction between family members—eek!

Mistake #1: Failing to update your beneficiaries

You might already know that several types of assets—including retirement accounts and insurance policies—can pass on to heirs regardless of whether or not you have a will. However, what you may not know is that the beneficiaries listed on these accounts supersede even your last will and testament (the document that communicates your final wishes regarding the distribution of assets and other possessions).

Consequently, your assets can end up in the hands of an unintended party: such as an ex-spouse or even a deceased relative. Other circumstances may result in the inadvertent exclusion of a specific person, especially if you opened the account years ago (e.g., before the birth of a child or someone marrying into the family). These situations often lead to probate (the legal process of administering a person’s estate after his or her death) and costly delays.

Therefore, the simplest action you can take every few years—and whenever you experience a life-changing event—is to update the beneficiaries on your accounts, especially those established years ago. Be sure you choose heirs who are mentally competent and not minor children (under the age of 21) to avoid the headache of a court-contested decision. You should also consider naming contingent beneficiaries for extra protection.

Also keep in mind that in community property states (as of 2024, these include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), a spouse is considered a joint owner of nearly all assets and debts acquired in marriage. If you live in one of these states and name others (in addition to or instead of your spouse) as beneficiaries, therefore, your accounts may be subject to probate.

With respect to real estate assets, specifically, be sure to review how your property is titled.

Mistake #2: Having an outdated will—or lacking one completely!

According to a recent Caring.com survey, two out of every three adults (18 years of age or older) lack a will. Even more concerning? Fifty-seven percent (57%) of adults ages 55+ haven’t made one. Forty percent (40%) of respondents without a will claim they don’t have enough assets to do so, which rings in as the most common reason for lacking this critical document.

When you die without a will (referred to as “dying intestate”), a court decides how to distribute your assets. Arrangements can include freezing your assets until an executor is appointed and determining how to split them among family members, with results that likely differ from your desires. The process can thus become extremely complicated, expensive, and time-consuming for living family members.

Consider the well-documented (and seemingly never-ending) probate cases involving musicians Prince and Aretha Franklin. After Prince passed away in 2016, it took approximately 6 years to settle his estate. Meanwhile, Aretha Franklin’s estate is still in limbo now approximately 4 years after her passing. Admittedly, these are extreme examples due to the dollar value of their estates; but they should still make you think twice about forgoing a will due to the potential stress this can cause family members.

Even if you do have a will, know that planning doesn’t end there. As with all other estate planning documents, it’s important to review your will every few years to help avoid any confusion over assets you no longer own—or even worse, those worth a lot more now compared to when you created your will (especially if this leads to unequal distribution among family members).

Mistake #3: Excluding health care from your estate plan

A living will (also known as an advanced directive) allows you to specify your end-of-life medical care decisions in the event you’re unable to communicate them personally. This document also helps provide guidance and prevent confusion and/or disagreements, as no other party can override decisions you’ve already made.

To absolve grieving family members from making potentially stressful decisions, therefore, thoughtfully consider your desires for end-of-life care—such as incorporating intubation and ventilator provisions—as well as your preferred funeral, memorial, and/or burial arrangements.

Mistake #4: Not discussing your plan with beneficiaries

It’s smart to avoid any ambiguity surrounding your asset distribution by sharing your plans with others—there’s no secrets here!

For example, if you fail to share details about your advanced directive and then end up in intensive care, you’ll make it much harder for family members to guide doctors on your preferred type of treatment.

Openly sharing your desires also applies if you wish to leave valuable possessions to heirs that they’d rather not inherit (e.g., your family home). If you’ve lived and created many memories in your house for decades, for example, the home carries sentimental value for you but is likely impractical for inheritance purposes—because unlike a bank account, a home is difficult to share. Questions surrounding responsibility for home maintenance or overall house access/residency will also ultimately arise. If one of your kids wants to purchase the home, at what price do you sell it to them? Subsequent answers require dedicated conversations (likely multiple) that should not be avoided.

Good communication can ultimately help ensure heirs receive items of relative value, thus reducing potential bickering between family members.

Mistake #5: Appointing the wrong executor or trustee

Executors and trustees are two types of fiduciaries (people or institutions appointed to take legal control over assets for the benefit of beneficiaries) often relied on for estate planning purposes.

While executors are responsible for carrying out the terms of your will (with obligations including collecting and distributing assets, paying debts, and filing any tax returns), trustees control assets held within a trust and bear responsibility for investments, accounting, and tax filings in perpetuity or until the trust is terminated.

Choosing the wrong fiduciary can breed multiple problems, including mistakes that hinder the probate process and/or create friction between family members. That’s why going beyond trust to ensure the party appointed has the financial acumen and organizational skills to fulfill your wishes often translates to a smoother experience for all beneficiaries.

Mistake #6: Not making special provisions for a challenging child

Splitting an inheritance among children can get complicated, especially if you’ve supported one of your kids longer than others, one child is wealthier or has more children than his/her siblings, one has stepped up to provide more care for you as you’ve aged, or one particular child is (for lack of a better term) “challenging.”

No matter the exact situation at hand, the objective here is to ensure your inheritance won’t cause discord amongst siblings—especially disharmony that can create a lifetime of friction. This is precisely why the element of trust is so very important.

For example, if one of your children struggles with drug or alcohol addiction, it’s sometimes wise to set up a living trust (rather than a will) with substance abuse provisions for when he/she gets sober. Standard conditions in this case can include drug testing as a distribution prerequisite or even staggered distributions dispersed at specific ages. Until these criteria are met, you can give more to your other kids. You can also utilize a trust for a child who is a poor money manager, distributing payments over a lengthier period of time.

Mistake #7: Not properly titling assets

How you title assets determines whether or not you’ll need to go through probate. Let’s discuss the most common types of titles and their legal impact…

When assets are titled with a “joint tenancy with right of survivorship” (JTWROS), the account will pass directly to the surviving account holder(s) regardless of what your will states. Bank accounts and real estate are two examples of JTWROS assets.

Individual accounts, meanwhile—wherein one person owns the asset—will pass on per the terms of the will (or trust) and are subject to probate.

Finally, “payable on death” (POD)/“transfer on death” (TOD) is a designation added to an individual account. While TOD typically applies to investment accounts, bank accounts generally use POD designations. Specifying a beneficiary will transfer assets to designated parties without the need to go through probate.

Mistake #8: Not updating your estate plan when you move out of state

If you're moving to a brand-new state, you likely have a checklist to aid this transition. If you’re like so many others out there, however, updating your will probably isn’t on this list.

As with all other estate planning documents, it's essential to review your will every few years to help avoid any confusion over assets you no longer own—this is especially true if you no longer reside in the state where you created your will, as each state has its own income and estate tax laws. Furthermore, depending on where you live, your estate planning documents may no longer be valid.

Enlisting the help of a local estate planning attorney is perhaps your best bet to navigate any potential changes you'll need to make to your estate planning documents.

Mistake #9: Not including your digital assets

Do you have email accounts, own domain names, maintain online storage for photos and videos, and/or invest in cryptocurrency? If so, you’ll need to list these (and any other digital assets) and include them in your estate plan. A failure to do so could prevent your heirs from gaining access.

In sum: estate planning mistakes are often costly

Not only are they pricey, but estate planning errors can also generate lots of stress among loved ones. Hopefully the information shared in this post will help you avoid some of the most common pitfalls moving forward.

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Vision Retirement is an independent registered advisor (RIA) firm headquartered in Ridgewood, New Jersey. Launched in 2006 to better help people prepare for retirement and feel more confident in their decision-making, our firm’s mission is to provide clients with clarity and guidance so they can enjoy a comfortable and stress-free retirement. To schedule a no-obligation consultation with one of our financial advisors, please click here.

Disclosures:
This document is a summary only and is not intended to provide specific advice or recommendations for any individual or business.