1) Outdated documents. Life is constantly changing, whether that be through marriages, divorces, births, deaths, and/or assets. Your estate plan should evolve with those changes. One of the most common mistakes is failing to update your will, trust, or beneficiary designations. An ex-spouse could unintentionally remain the beneficiary of your life insurance policy.
2) Failing to fund a trust. Creating a trust is a powerful estate planning tool, but only if your assets actually flow through it. That means transferring ownership of your assets (such as real estate, life insurance, bank accounts, and investments) into the name of the trust or naming the trust as a beneficiary is essential. If you neglect this step, those assets may go through a more time-consuming and usually more costly probate process. Even worse, if there are old beneficiary designations in place or joint owners named, your assets may go to the wrong beneficiaries entirely.
3) Not planning for incapacity. Estate planning isn’t just about what happens after you die or minimizing estate taxes. It’s also about protecting yourself while you’re alive. Without documents like a durable power of attorney and a healthcare proxy, your family could be forced to go to court to make decisions for you if you become incapacitated.
4) Ambiguous or conflicting instructions. Vague language or conflicting terms in your documents can lead to confusion, disputes, and litigation among your heirs. If your will says one thing and your beneficiary designation says another, the latter usually takes precedence. Clear, consistent instructions across all documents are essential.
5) Ignoring estate taxes and debts. Many people assume their heirs will receive everything they leave behind, but estate taxes and outstanding debts can significantly reduce what’s passed on. Without proper tax planning, a large estate could be hit with a hefty estate tax bill (which is especially true for Massachusetts residents), and creditors may have a claim to assets.
6) An estate plan is not just one document. It’s many, and it should be reviewed regularly to make sure it still reflects your wishes. It requires regular review and thoughtful attention to detail. Working with qualified professionals and revisiting your plan as life changes can help ensure your wishes are honored and your loved ones are protected.
