Six Common Estate Planning Pitfalls

Estate planning is a broad field that often presents multiple different methods to achieve a client’s goals. The unfortunate downside to this fact is that there are also many ways attorneys and their clients can make mistakes when attempting to create an estate plan. Whether you are thinking of beginning the estate planning process or reviewing your existing estate plan, be sure to consult this list of common pitfalls to guarantee your bases are covered.

1. Failing to update your estate plan.

The most effective estate plans are created early and updated whenever an important life event occurs. Have you moved to a new house? Have you had any new children? Have any investments had significantly higher or lower returns than expected? Any significant changes to your family, plans, or assets warrant updating your estate plan to ensure it still accomplishes your goals and protects your family. If you don’t review your plan periodically, it may not be as effective as you hoped it would be. 

2. Do-it-yourself estate planning.

Many people attempt to use an online service to create a simple will and assume — often mistakenly — that it is sufficient to meet their needs. But these online services use broad, generic templates with a one-size-fits-all approach that provides quantity over quality. Good estate planning can be complicated, and it is easy to miss important aspects of the law without the aid of a qualified attorney evaluating the unique needs of your case. Without that individualized attention, your assets can be tied up in court for much longer than necessary, you can end up paying more than you realize, and the family members you tried to provide for may not actually end up receiving the assets you would like them to. Estate planning has meaningful consequences, and it’s important to get expert advice on how to best meet your goals. 

3. Misunderstanding how assets are transferred on death.

Another dangerous assumption somewhat related to do-it-yourself estate planning is that your will or trust automatically controls the disposition of your assets. However, jointly-titled assets and accounts with named beneficiaries do not pass through a will, and they only pass through trust if they are properly retitled or the beneficiary designations are updated to account for the trust. Operation of law trumps the estate plan when it comes to jointly titled assets and assets with beneficiary designations. Attorneys can provide needed guidance since they are very familiar with how this system works and can make sure that your will or trust controls the disposition of your assets. 

4. Naming just one beneficiary, personal representative, or trustee.

The most comprehensive estate plans are flexible and account for complications that may arise in the future. For example, if a trust only has one trustee (i.e., the person managing the trust) and that trustee dies without the trust designating a successor trustee, then the trust assets could become locked up in trust until the court appoints a new trustee. It is important to name successors for any important role in your estate plan so that your plan remains agile, efficient, and effective. 

5. Not funding trusts.

“Funding” a trust means transferring property into the trust. Critically, a trust does not come into existence and is not legally effective until it is funded, and the trust can only control the management and disposition of property that has been funded into the trust. Any property not funded into the trust may be required to be administered through the probate court after the owner passes away, which may result in the property not reaching its intended recipients. For these reasons, properly funding a trust is an essential part of creating a trust-based estate plan. 

6. Ignoring digital assets.

Digital assets are too often forgotten when it comes to estate planning. This is a much larger concept than people tend to appreciate, since digital assets include your cryptocurrency, your email, your social media, your streaming accounts, and more. If your estate plan does not include instructions for how to handle these assets and provide your representative with the proper authority to carry out your wishes, it can be a major challenge to access, change, and manage these accounts in a way that honors your privacy and goals. 

If you’d like help starting your estate plan or reviewing your existing plan, contact Kimball & Wells today. We can provide you with clear guidance on how to best avoid these common pitfalls and create an estate plan that is flexible enough to withstand life’s changes.

Adam Kimball
Kimball & Wells, PLLC
Adam@kimballwells.com
(616) 317-8489