7 Common Estate Planning Mistakes and How to Avoid Them

Estate planning is not just for the wealthy or the elderly. It matters for everyone, regardless of age or stage of life. By outlining how your assets should be managed and your wishes honored, an estate plan protects your property and your intended beneficiaries. 

Despite best intentions, people engaged in estate planning can make critical mistakes or overlook key details that undermine their goals. Here are seven common pitfalls that you should watch out for:

• Not updating your estate plan — Events that can have profound implications for your estate plan include marriage, divorce, birth or adoption of a child, death of a loved one, relocation to a new state or acquiring significant new assets. Outdated documents may name the wrong people as beneficiaries or executors, accidentally disinherit family members or fail to comply with state laws. Review at least every three years or after any major life event, and make needed updates.

• Failing to fund a revocable living trust — Funding the trust involves retitling bank accounts, real estate, investments and other property into the trust’s name. Commonly overlooked assets include life insurance policies, brokerage accounts and real property acquired after the trust is created. Review your asset titles carefully to avoid this mistake.

• Failing to make a will — People may think they can rely on beneficiary designations and living trusts to have their assets transferred outside of probate. But there may be assets that they forget, the effect of which is to leave them to intestate distribution. A will can make sure that all assets are transferred according to your wishes.

• Choosing the wrong executor or trustee — The people you task with managing your estate have significant responsibilities. Choose an executor or trustee who is organized, trustworthy, impartial and willing to serve. In some situations, or to prevent family disputes, it may be wise to appoint a professional fiduciary such as a trust company, since family members may have conflicts of interest, be overwhelmed by the task or live too far away.

• Ignoring digital assets — Without clear instructions and legal authority, your loved ones may not be able to access or manage such assets, which include email and social media accounts, cryptocurrency, online banking and cloud storage. Include an up-to-date inventory of digital accounts and passwords, and add specific authorization to empower your representative.

• Not coordinating beneficiary designations — Certain assets pass directly to named beneficiaries, regardless of your will’s provisions. These assets include retirement accounts, life insurance, and “payable on death” bank accounts Inconsistent or outdated designations can result in unintended consequences or family disputes. Review all beneficiary forms regularly, especially after life changes, to ensure coordination with your overall estate plan.

• Overlooking incapacity planning — Estate planning is also about protecting yourself while you’re alive. Powers of attorney and advance health directives give trusted individuals authority to make financial and medical decisions if you cannot. Have these documents in place and communicate your wishes with loved ones. 

Estate planning is an ongoing process, not a set-it-and-forget-it task. Take time to review your plan regularly or start planning now if you haven’t already. For peace of mind, consider consulting with a qualified estate planning attorney to help you avoid costly mistakes and ensure your legacy is protected.

Jeffrey P. Hall, PLLC assists Arizonans with all aspects of estate planning. I have offices in Chandler, Phoenix and Peoria. Call 480-409-5174 or contact me online to schedule a free initial consultation.