Common Estate Planning Mistakes To Avoid

According to a 2023 study conducted by Caring.com, nearly two-thirds of Americans do not have an estate plan in place.  And many with plans never update them in light of life events or changing laws.

With this in mind, here are some of the most common mistakes made in estate planning. We always encourage everyone to periodically review their plans.

1. Believing you are too young to plan
   It is never too early to start your plan; anyone with assets and loved ones needs an estate
   plan. Having an estate plan in place ensures that your affairs are in order. This includes
   planning for medical power of attorney, etc.
   
   
2. Believing trusts are only for the super-wealthy
   Trusts can be incredibly valuable tools, providing greater control and privacy in regard to how
   assets are distributed and potentially offering tax savings.
   
   
3. Not keeping an estate plan up to date
   Failing to regularly update your plan can lead to unintended consequences and not
   accurately represent your wishes. Significant life events such as marriage, divorce, new
   family members, loss of loved ones, a significant change in assets and new legislation that
   could impact your estate planning should trigger a review of your plan.
   
   
4. Choosing the wrong executor or trustee
   It is important to carefully consider the individuals you name as executors and/or trustees for
   your estate. Inexperienced or untrustworthy agents may struggle with the complexities of the
   process, waste time, mishandle assets, make decisions that result in unnecessary taxes or
   not act in the best interests of the beneficiaries. (another mistake: not naming a back-up
   executor or trustee in case your first choice is unable or unwilling to fulfill the role.)
   
   
5. Failing to account for estate and gift taxes
   These taxes can have a significant effect on the value of your estate. Consider strategies
   that can help alleviate the burden.
   
   
6. Failing to consider Capital Gains and Income tax consequences:
   Income tax and capital gains implications have to be considered as part of your overall estate
   plan. With proper planning, you can minimize these tax consequences.
   
   
7. Failure to appropriately leverage tax-advantaged accounts like IRAs and 401(k)s
   There have been significant changes in inheritance laws relating to retirement accounts in
   the past few years. Be sure to review accounts and carefully consider tax implications when
   assigning beneficiaries, as well as planning distributions.
   
   
8. Failure to explore the tax advantages of charitable giving.
   Along with the satisfaction that comes from supporting organizations that you care about, you
   can optimize what you can give to both heirs and charities by utilizing appropriate charitable
   giving strategies. Consult your advisors to determine what might work for you.
   
   
9. Insufficient planning for business succession
   If you’re a business owner, it’s important to have a thoughtful and clear succession plan in
   place to avoid any complications or tax issues when you transfer your business.
   
   
10. Choosing the wrong professionals (or not using professionals) to help plan and
    document your wishes
    Your estate plan is part of a larger financial/ tax strategy. You can avoid costly mistakes by
    collaborating with experienced professionals who have ample knowledge/expertise to guide
    you, identify opportunities and ensure that your documents are in legal order.