Estate planning seems so simple. It can be deceptive, though. Here are ten mistakes people commonly make that can cause chaos for your family later. These are not in any particular order of importance.


Mistake #1: Believing Your Estate Is Too Small. Estate planning does not depend on how much you have. It is about how you handle what you do have. Your net worth may influence the type of estate plan that is appropriate for you, but even a smaller estate warrants some type of planning.

Mistake #2: Believing That You Are Too Young. A lot of people think they are not old enough to need an estate plan. It is surprising to see how many obituaries there are for people in their 30’s, 40’s or 50’s. Anyone over the age of 18 should seriously consider having an estate plan in place. This is especially important for families with young children, because the lack of an estate plan can cause young children to end up with half of the assets of a parent that passes away prematurely.

Mistake #3: Not Planning Properly to Prevent Assets from Going to Unintended Beneficiaries.    An estate plan can preserve your children’s inheritance if they divorce.  Up to 50% of your assets could end up with an ex-son or daughter in law without proper planning.  Proper estate planning can also prevent your assets from going to strangers, instead of your children, should your spouse get remarried after your death.

Mistake #4: Failing to Plan for Incompetence.  Every estate plan should address what happens if you become incompetent and unable to manage your financial affairs or make medical decisions.  The common perception is that estate planning is only death planning.  Guardianship proceedings for a mentally incompetent adult can be lengthy and expensive.  Implementation of commonly used estate planning documents can avoid those problems.

Mistake #5: Incorrectly Titling Assets. It is absolutely essential to coordinate the way you title your assets with the type of estate plan you have. This is one of the most overlooked aspects of estate planning. For example, just because you set up a trust does not mean you will automatically avoid probate unless all of your assets are titled correctly to work through your trust. Also, people often misuse “probate substitutes,” such as joint and survivorship, payable on death, beneficiary designations and similar titling methods. Sometimes these are good, but if used incorrectly, they can completely ruin an estate plan.

Mistake #6: Failing to Properly Own Life Insurance.  While the proceeds of a life insurance policy are generally income-tax free, insurance proceeds left to a surviving spouse or children may eventually be subject to estate tax without proper planning.

Mistake #7: Wasting Basic Estate Tax Planning. Estate planning is not all about taxes, but tax planning is often an important aspect. This year, in most cases, the first $5.25 million of each person’s estate is exempt from federal estate taxes, so many people do not have to worry about that. But did you know that any assets over $1 million in value may be subject to New York estate tax? Good estate planning can minimize the impact of Federal and New York estate taxes. [Note that tax laws change frequently. For a summary of 2017 changes, see https://www.schwartzettenger.com/how-will-the-new-tax-law-impact-your-estate-plan/]

Mistake #8: Ignoring Income Tax Consequences. Income taxes are often an important consideration in estate planning. Individual retirement accounts, 401k’s and other retirement plans are often subject to both estate and income taxes on your death. The tax hit can be huge without proper planning.

Mistake #9: Do it Yourself Planning. Estate planning is more than just creating documents. It involves understanding the whole picture of your finances and personal goals, and then determining the best tools to be used to accomplish your objectives. Most people cannot properly plan their estate on their own using software or internet forms.

Mistake #10: No Estate Plan at All.  Perhaps the worst mistake you can make is not having any estate plan at all. If you do not have an estate plan, New York law has one for you. The problem is that it may not work the way you would have wanted.

There is an abundance of misinformation and misunderstanding about estate planning. The mistakes listed above are just a sampling of poor planning. You owe it to yourself – and more importantly to your family – to avoid mistakes and to put a good estate plan in place. You can do this by working with experienced professionals, like our firm, who focuses on estate planning. Otherwise, the legacy you leave after you are gone may be one of chaos for your family to clean up.

Learn more about our Wills, Trusts and Estates practice.

Leave a Reply