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7 Basic Estate Planning Mistakes (to Avoid)


Usually I prefer to advise people on positive steps to take, rather than mistakes to avoid.  I’m going to break that rule slightly in this post, which is adapted from a page that we used to have on our main website.  I think it makes more sense here instead, with links back to our website for more information.

1. Not having a Will

Every adult that owns property or has minor children should have a Will. If you don’t have a Will, the state writes one for you — the state decides who gets your assets, who runs your estate, who cares for your minor children, whether your representative needs a surety bond and whether your probate estate will be supervised by the court. Even for people who own assets in a living trust, a pour-over Will is still crucial to catch any assets that may be outside the trust or may be created at death.

2. Not having a Power of Attorney for Health Care

A Power of Attorney for Health Care is used to express your medical wishes and state who you want to make health care decisions when you’re unable to. This gives your agent very important authority and gives this important responsibility to the person of your choice rather than the person of choosing from the health care provider or state law. As most states have their own standard forms, it is wise to have a valid power tailored to the state that you are currently living in and to update them when you move.

3. Not safeguarding original estate planning documents

A common problem we come across is persons who have lost or misplaced their original executed documents. This problem is especially crucial when it comes to your Will. As a general rule, only the original executed will can be admitted to probate. If the original cannot be located, the law presumes that it was revoked. This presumption may be overcome by strong evidence proving a contrary intent, but this can be a tricky proposition and not one you want your heirs to rely on. The best location for the original will is a safe deposit box. The next best option is a fireproof home safe. In either case, it is important to let your family know where they can find the documents when they need to locate them. Powers of Attorney should not be stored in a safe deposit box because they may be inaccessible when needed on a holiday or weekend. When we prepare and execute documents, we provide clients with specific instructions on how and where to store them.

4. Failing to fund living trust

This might be the most common problem for the typical trust-based estate plan. A living trust will not avoid probate if assets outside of the trust exceed $100,000 or include any real estate (for Illinois residents). Additionally, assets outside of the trust will not readily be accessible for your care should you become incapacitated. Full trust funding should take place shortly after the initial execution of documents, and also maybe just as importantly, be kept in mind as new assets are acquired or transferred. We provide clients a convenient Trust ID wallet card to remind clients how title should be taken as assets are acquired or moved.

5. Failing to correctly prepare or update beneficiary designations

This is another common problem. Many people are simply unaware of the details of who their designated beneficiaries are for life insurance, retirement accounts and annuities. The identity of designated beneficiaries can have very important income and estate tax implications as well as the identity of the persons who may receive a substantial portion of your assets. When estate planning documents are created or updated, designations should always be reviewed to ensure that they fit well into your overall plan. Updating a Will or a Trust generally does not serve to automatically update accounts that have specifically designated beneficiaries.

6. Failing to consider contingent beneficiaries

Nobody wants to contemplate the possibility of their children or beneficiaries predeceasing them. But part of a complete estate plan is considering even unlikely contingencies. As a result, consideration should be given to who you want to receive your assets should your primary beneficiaries predecease you. Relatives, friends and charities are common choices. If all beneficiaries should predecease you without having named a contingent beneficiary, your estate/trust would end up being distributed according to state intestacy law. This is likely not be what you would want.

7. Overusing joint tenancies

Joint tenancy can be a very useful estate planning tool. It can also be a nightmare. A common scenario we often see is a parent adding on a child as a joint tenant on a bank account for convenience. This can create a number of problems including subjecting the account to the child’s creditor/divorce problems. It may also subject the account to substantial litigation should the beneficiaries of your estate/trust differ from the identity of the joint tenant.

Image courtesy of Stuart Miles/