5 Common Estate Planning Mistakes (and How To Avoid Them)

There’s a lot to think about when it comes to estate planning, and it’s easy to miss important details along the way. But an estate plan is supposed to make a difficult part of life easier: It ensures that your assets are properly managed and distributed upon your passing. So, if you haven’t created a plan at all, have neglected to communicate your desires to loved ones, or have skipped a recent review, now’s the time to do something about it. We spoke with T.L. Turnipseed, head of advanced estate and tax planning at Alta Trust Company, about the most common estate planning mistakes he’s seen people make, and how you can avoid them.

Mistake No. 1: Having No Plan at All

Preparing for the day of our passing isn’t something most of us look forward to. That may be why data from the Pew Research Center indicates that a third or fewer of adults under 60 have created estate planning documents and documented their end-of-life preferences. 

But experts generally recommend that everyone over the age of 18 have at least a basic estate plan in place, and according to Turnipseed, delaying that planning is one of the biggest mistakes people make. “Death without a plan creates confusion and compounding issues,” he says.  

It’s also important to make these plans while you’re at full mental capacity, which is necessary for estate planning. It means you’re able to understand what each document means. 

“Planning early is what preserves choice,” Turnipseed says. “Without adequate arrangements already in place, a later loss of capacity may leave the family needing court authority through a guardianship or a conservatorship.” That process is not just expensive: “It transfers decisions about a parent’s money and medical care to a judge who has never met the family.”

Mistake No. 2: Delayed (or Poor) Fiduciary Selection 

Choosing a fiduciary — aka the person or entity you pick to manage your financial, legal, or medical affairs in an estate plan — is often overlooked or delayed. 

“Fiduciary selection deserves more thought than it usually receives,” Turnipseed says. He explains that it’s important to decide (even if only temporarily) “who should receive what, whether any of it should be held in trust rather than distributed outright, and who is both willing and able to serve as executor, trustee, guardian, and agent, with a successor named for each.”

It’s better to see these roles as “a job rather than an honor,” he adds. “It carries personal liability and a continuing duty to inform and account to the beneficiaries.”

When deciding on these roles, choose the person for “honesty, financial competence, availability, and a willingness to keep records,” Turnipseed says. “Ask the person before naming them, name a successor, and make sure both know where the documents are.”

Mistake No. 3: No Communication of Your Plans

“A plan that no one knows about may not be carried out as the deceased intended,” Turnipseed says. For this reason, your fiduciary should “know they have been named, where original [documents] are kept, whom to call, and have the practical access instructions needed to use the documents in the first week.”

Communication with your family and beneficiaries also reduces the potential for conflict. “Most [estate] contests are not really about the law,” Turnipseed says. “They arise from surprise, from a sense that a sibling exercised influence, or from a decision that appeared arbitrary because it was never explained.”

There’s no need to disclose every number or seek approval, but “the conversation should be planned with counsel, paying attention to family dynamics and to the risk that a discussion becomes an occasion for pressuring an elderly parent.” 

During these discussions, Turnipseed advises listening for potential misunderstandings rather than assuming your intentions will be obvious and clearly understood. Most of all, he says, “informal family understanding is not enforceable … and rarely a sound idea.”

Mistake No. 4: Not Revisiting Important Documents 

A will is a single document that’s part of your estate planning, and it “governs only probate property,” Turnipseed explains. (Generally speaking, probate property consists of things owned by a decedent in their name alone and must go through the probate process before it’s distributed to heirs — think things like jewelry, real estate, cars, and bank accounts. It’s one reason why some opt to put their property in a trust, which won’t need to go through probate.) 

A will doesn’t automatically include nonprobate property such as retirement accounts, life insurance, annuities, or transfer-on-death accounts. Those will go to the beneficiary listed on their respective forms. 

Your estate comprises all of what you own upon your passing, so when preparing for planning, you should “assemble a schedule of assets and liabilities with recent statements, deeds showing exactly how title is held, life insurance policies, retirement and brokerage accounts with their current beneficiary designations, business and partnership agreements, any prenuptial agreement or divorce instrument, and any existing documents” that may be necessary.

Then, make sure to review any existing assets for beneficiaries. For example, if you’ve named a beneficiary on your 401(k) and haven’t made any changes, they will inherit that amount even if you haven’t had a relationship with them for years. Or, if you’ve gotten a divorce, your ex-spouse won’t be automatically removed as the beneficiary on your 401(k) or a pension due to federal laws. The same goes for a revocable trust. The most practical step, Turnipseed says, is to “review primary and contingent beneficiaries after every major life change.”

Mistake No. 5: Planning for Death But Not for Life

If you become sick or disabled, “a will appoints no one to write a check, renew a lease, file a return, or consent to surgery,” Turnispeed says. That work belongs to a financial power of attorney and requires a health care directive that “names an agent [a designated person], states treatment preferences, and is paired with an authorization allowing that agent to obtain medical information.”

You should also designate ownership of any online accounts, from digital music services to emails. Laws vary by state, but your online accounts may require an express grant of authority, a document that allows a person to act on your behalf. “A direction in the will, trust, or power of attorney is what overcomes the terms of the service agreement,” Turnipseed says. 

While the process of estate planning seems complex, it’s far simpler to plan for these complications now, rather than avoid the planning process completely. Your loved ones will thank you.

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