Estate planning mistakes can upend your best efforts to protect your family's finances after your death. Everyone can benefit from an estate plan, a process that entails getting your financial affairs in order so that your assets and possessions get passed on to the people or organizations you want to inherit them.
Having a comprehensive estate plan will also spare your loved ones the pain and expense of determining how to allocate your money and property while they’re grieving your loss.
But creating an estate plan can be complex and emotionally challenging, which may explain why two out of three Americans don’t have any estate planning documents, according to Caring.com’s 2023 Wills and Estate Planning survey of 2,483 adults ages 18 and older. And around a quarter of those without a will said they don’t ever plan on creating one.
Subscribe to Kiplinger’s Personal Finance
Be a smarter, better informed investor.
Save up to 74%
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Here are eight common estate planning mistakes to avoid.
1. Procrastination
You certainly don’t want to become incapacitated because of a health emergency, such as a stroke or heart attack, and lack an estate plan. Yet over 40% of Americans without a will said they plan on waiting for a medical diagnosis to create a will, the Caring.com survey found. So don’t wait to get your estate plan in order.
2. Creating an estate plan on your own
Estate planning documents that are incomplete or contain errors can cause complications when you pass Consider hiring an estate attorney to help you craft a comprehensive estate plan and understand the legalese.
Generally, estate lawyers charge $200 to $2,000 for an estate plan, depending on the complexity of the client’s assets, according to Legal Match. (Many estate attorneys offer free initial consultations.) You can find an estate attorney in your area using an online directory such as Justia, Legal Match, or the American College of Trust and Estate Counsel (ACTEC).
3. Leaving loved ones uninformed
Sharing your estate plan with your family and heirs can help prevent confusion, conflict, and unnecessary stress in the future. Sit down with the relevant people and have an open conversation about your intentions.
4. Keeping estate planning documents in a safe or safe deposit box
Don’t keep your estate documents in a safety deposit box or other place that’s difficult to access. For good measure, provide copies of your estate plan to your appointed executor or trustee, a trusted family member, and your estate lawyer.
5. Missing key documents
An incomplete estate plan can create confusion — and the potential for disputes among heirs when you pass. Make sure your plan includes these essential documents:
- Last will and testament. Often simply referred to as a "will," a last will and testament outlines your final wishes and instructions for the distribution of your assets and the management of your affairs after you pass.
- Beneficiary designations. Make sure to assign beneficiaries for 401(k) and IRA accounts, pensions, and life insurance policies.
- Durable power of attorney for medical care. This appoints a person to make medical decisions for you, on your behalf, should you become mentally incapable of making them yourself. It often includes an advanced healthcare directive, which instructs your family and doctors to use or not to use life support.
- Durable financial power of attorney. This assigns an individual to manage your assets if you become incapacitated.
- Funeral instructions. Specify whether you’d like a burial or a cremation and the type of funeral service you want.
- Proof of identity. Gather your social security card, birth certificate, marriage and/or divorce certificate, and any prenuptial agreements.
- Deeds or loans for large assets. Collect this paperwork for homes, boats, and other big assets.
6. Overlooking digital assets
Many people forget to account for their digital assets, such as cryptocurrencies, social media accounts, cloud storage, and digital files when creating an estate plan. Consider assigning a digital fiduciary in your estate plan who has the right to access your digital assets when you pass.
7. Not updating your plan
Failing to review and revise your estate plan after major life events — a marriage, divorce, birth of children or grandchildren, or the acquisition of new assets — can lead to consequences, such as assets being passed to the unintended beneficiaries.
8. Appointing the wrong executor or trustee
Choosing someone who may have a conflict of interest can lead to problems when it comes time for them to administer your estate. Select an individual (or individuals) who are unbiased, and get their permission before you assign them as an executor or trustee.
