How to Avoid the 6 Most Common Estate Planning Mistakes
Don't Let These Mistakes Derail Your Estate PlanYou want peace of mind knowing that your loved ones are taken care of after your death. While it may be difficult to think about, preparing a will and revisiting and updating existing estate plans that may have been made years ago are the best way to prevent needless mistakes in the future, many of which could cost your family thousands of dollars.
Here are some of the most common mistakes we see people make regarding their estate planning. |
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1. Not Having an Estate Plan in the First Place
No estate plan? You can bet there will be some confusion on how your assets should be distributed after your death. The law will decide which family members get your assets, but it does not provide a clear path for how to divide things like real property, interests in a business, or other things that your heirs could be forced to sell in order to divide. What the law thinks you want may also not match what you want. For example, if you are married with no children, or married with children who are also your spouse's children, your spouse will get 100% of your assets even if you wanted to leave something directly to your children or some other family member or friend or charity. Additionally, the cost of getting through the probate process can eat up 3% to 8% of the value of your estate, which in turn takes that money out of the pockets of the people you mean to take care of with your estate planning.
Even if you have a will, it may not be enough. For example, most people think that all they need is a will, but many assets are typically not named in a will, such as IRA accounts and life insurance. Those assets will pass to whomever you have named as a beneficiary, no matter what your will says. And for a lot of people, these assets can represent most of what you have to distribute to your loved ones. You don't even need a lawyer for this part- you just need to check and make sure that your designations are up to date and accurately reflect who you mean to receive those funds.
Even if you have a will, it may not be enough. For example, most people think that all they need is a will, but many assets are typically not named in a will, such as IRA accounts and life insurance. Those assets will pass to whomever you have named as a beneficiary, no matter what your will says. And for a lot of people, these assets can represent most of what you have to distribute to your loved ones. You don't even need a lawyer for this part- you just need to check and make sure that your designations are up to date and accurately reflect who you mean to receive those funds.
2. Not Having Your Estate Plan Examined by a Professional
Do-it-yourself (DIY) wills that you create online might save you a few bucks, but it can cost your family thousands of dollars if it lacks in-depth tax planning strategy, or fails to take into account your unique circumstances and goals. That’s not even counting the costs of hiring a lawyer to mitigate the damage after the fact! In the worst case scenario, the probate court may not admit the DIY will at all. In this situation, assets will pass to those who would receive it, as dictated by state law, which may not be what you intended and may create confusion and stress for your family.
In the age of the internet, it is easy to be misinformed, and it is important to know what your state (meaning the state of your primary residence) requires. For example, there are states that recognize "holographic wills"- a handwritten will signed by the person making it, and you may read about this online. Massachusetts does not recognize any will, handwritten or not, unless it meets the specific signature requirements under state law.
In the age of the internet, it is easy to be misinformed, and it is important to know what your state (meaning the state of your primary residence) requires. For example, there are states that recognize "holographic wills"- a handwritten will signed by the person making it, and you may read about this online. Massachusetts does not recognize any will, handwritten or not, unless it meets the specific signature requirements under state law.
3. Trusting Your Children with More Than They Can Handle at Their Age
Every parent wants to believe their children are fit to responsibly manage and benefit from their inheritance as soon as they turn 18, but that isn’t often the reality. Most young adults typically aren’t experienced enough to manage large sums of money efficiently. When you add to that the fact that they will be receiving an inheritance at the same time that they are grieving and processing a parent's passing, and you have a potential recipe for poor choices that are hard to undo later. Setting up a trust with provisions regarding when your children can receive their inheritance and what kinds of things a trustee can authorize expenditures for in the meantime can not only protect your children, but also give them a structure and a person they can turn to as the learn how to manage their own affairs.
4. Depending on Family Members to “Do the Right Thing”
Rule of thumb: it’s better to establish a trust than to simply trust. Don’t rely on the goodwill of others to use your assets for the good of another, such as to take care of someone in your family. Anyone, including a family member, can opt to change their mind and oppose how you intended to use your assets after your passing. People's lives also change- the spouse you entrust with managing your assets for the benefit of your children may remarry and have other children competing for the same resources.
5. Not Realizing the Impact Taxes Can Have
Gift, income, and estate taxes all impact the sum passed to your descendants. For example, if you leave life insurance to one child and your Individual Retirement Account (IRA) to another, the child with the IRA will have to pay income taxes, while the one who received the life insurance will not. While you intended was to split your assets between them equally, the final amount they receive will differ. Also remember that in Massachusetts if your estate is worth $2 million or more (counting your life insurance, retirement savings, and real property like your home), your entire estate will be taxed. Even for families with a modest amount of assets, if there is life insurance and real estate involved, the total tax burden is usually well more than the cost of a little planning ahead of time to avoid or minimize that tax burden.
6. Not Understanding That Specifics Matter
It is important to remember that by the time a court has to interpret the words in your estate planning documents, you will no longer be around to explain what you meant by them. This means it is important to sweat the details and make sure the words on the page accurately describe what it is you intend to happen. Let’s say you decided to write a will that leaves all of your assets to your “surviving children.” If one of your children passes before you, would you like for your assets to pass to only your remaining children, or for your deceased child’s portion to pass to his/her children? There are ways to say exactly what you mean in that scenario, but if it is not clear it may be interpreted differently than you intended. It’s important to be specific when properly drafting an estate plan, factoring any and all worst case scenarios that might arise.
How We Can Help
At slnlaw, we specialize in guiding you through the complexities of estate planning to ensure your wishes are honored and your loved ones are protected. Our experienced attorneys can help you avoid common estate planning mistakes, minimize tax liabilities, and create a comprehensive plan tailored to your unique needs. You can use the button below to schedule a free information call, or give us a call at (781) 784-2322.
Meet Our Estate Planning Lawyers
![Emily Smith-Lee Employment Lawyer](/uploads/4/2/9/3/42934673/published/lea-headshot-2_248.jpg)
Emily Smith-Lee is the owner and founder of slnlaw. She is a 1996 graduate of Boston College Law School. She was previously a partner at the Boston office of a large international firm, where she worked for thirteen years before starting the firm that became slnlaw in 2009. She has been recognized as Massachusetts Superlawyer each year since 2013, and in 2018 earned recognition as one of Massachusetts Lawyers Weekly's Lawyers of the Year.
![Jenna Ordway Employment Attorney](/uploads/4/2/9/3/42934673/published/jenna-headshot2-cropped_339.jpg)
Jenna Ordway: Jenna is a 2013 graduate of Quinnipiac Law School, and also earned an LLM in Taxation from Boston University in 2015. She has been affiliated with slnlaw since 2011, first as a law clerk and then as an attorney. Jenna has been recognized since 2019 as a "Rising Star" by Massachusetts Superlawyers. Jenna wrote a book on estate planning: The Road to Peace of Mind: What You Need to Know About Estate Planning. Jenna has helped many individuals and families with planning to protect their legacies and loved ones, and planning for the future and succession of their businesses.
![Sharleen Tinnin employment attorney](/uploads/4/2/9/3/42934673/published/sharleen-tinnin_391.jpg)
Sharleen Tinnin: Sharleen is a 2010 graduate of Northeastern University School of Law, and earned her LLM in estate planning from Western New England Scool of Law in 2016. She has been with slnlaw since 2023. Prior to joining slnlaw, she worked with King, Tilden, McEttrick & Brink, P.C. on complex civil litigation matters. She previously worked for the United States Department of Justice, and received an "Excellence in Justice" award in 2017. Sharleen has helped many clients with planning for their legacies and their future, and navigating the probate process in Massachusetts after the death of a loved one.