Five Common Estate Planning Mistakes

An old saying goes: “Nothing in life is certain except death and taxes.” Because this clichéd phrase may have some truth behind it, it is wise to prepare a comprehensive estate plan even though contemplating and discussing your death with family members or advisors can be difficult.

A comprehensive estate plan often deals with many planning issues during lifetime and at death. Following are five estate planning mistakes that are unfortunately all too common:

Mistake 1:

Belief that estate planning is only for the wealthy. A comprehensive estate plan can offer numerous benefits to many individuals regardless of a person’s wealth, including control over how your property will be distributed (including trusts for spouse or children), planning to reduce estate administration costs, naming guardians for minor children, designating a personal representative to administer your estate, appointing agents to make financial and health care decisions for you in the event of your incapacity, and reducing or eliminating estate taxes imposed at death. Without instructions on these issues from you in a will and other documents, state law and the courts may decide these issues for you with results that may be inconsistent with your goals and desires.

Mistake 2:

Belief that a will controls all assets at death. A will may not control all of your assets at death. For example, assets that are held in joint ownership with another person generally pass automatically to the surviving joint owner at your death. In addition, assets which name a beneficiary upon your death (such as life insurance, retirement benefits, annuities, etc.) may pass automatically to the persons who are named as beneficiaries on such assets. Such assets are generally not controlled by your will. As a result, you should carefully review which assets pass automatically to others at your death and which assets pass under your will. Assets passing automatically by beneficiary designation or other means need to be carefully coordinated with the provisions in your will to make sure all of the assets pass as you intend under your estate plan.

Mistake 3:

Belief that a will is all that is needed. A comprehensive estate plan generally requires more than focusing on what happens at your death. In addition to a will, a comprehensive estate plan typically includes financial and health care powers of attorney in which you name another individual to make financial and medical decisions for you in the event you are alive but incapacitated. Such documents allow the person you have named to make these decisions for you without requiring court guardianship. In addition, if you are concerned about the costs of probate administration, a revocable trust may be helpful in reducing administration costs at your death. Finally, married couples may need to have a written agreement which clarifies ownership of assets between them during their marriage if they desire to modify the default provisions for ownership of assets by married couples under state law.

Mistake 4:

Belief that a “Do-It-Yourself” approach is sufficient. Trying to draft your own will or using a store-bought form can be penny-wise and pound-foolish. Many attorneys will offer a free consultation and provide an estimate of fees before starting any work. By not knowing what questions to ask or what technical issues that may be involved in your situation, drafting your own will may create more problems than you are solving and can cost taxes that could easily have been avoided. Knowing that your family and assets are properly cared for can be worth the cost of seeking professional assistance.

Mistake 5:

Belief that estate planning is a one-time event. Estate planning is often a process that evolves over time. It is generally not something that can be “checked off the list” when completed and then forgotten. As your circumstances change (your wealth grows, your children become older, you grow older), your views about your estate plan may evolve and change over time. As a result, your estate plan may need to be revised from time to time to reflect your current wishes. In addition, because estate tax and other laws which may affect your estate plan usually change over time, your estate plan should likely be reviewed with your advisor at least every five years (or sooner as needed).

Wipfli Financial Advisors, LLC (“Wipfli Financial”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC); however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. Wipfli Financial is a proud affiliate of Wipfli LLP, a national accounting and consulting firm. Information pertaining to Wipfli Financial’s management, operations, services, fees and conflicts of interest is set forth in Wipfli Financial’s current Form ADV Part 2A brochure and Form CRS, copies of which are available from Wipfli Financial upon request at no cost or at Wipfli Financial does not provide tax, accounting or legal services. The views expressed by the author are the author’s alone and do not necessarily represent the views of Wipfli Financial or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Wipfli Financial, and Wipfli Financial does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Wipfli Financial of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional.
Dean Stange

J.D., CFP® | Principal, Senior Financial Advisor

Dean Stange, J.D., CFP®, is a Principal and Senior Financial Advisor with Wipfli Financial Advisors in Madison, WI. As an attorney, Dean has provided estate and succession planning advice to business owners for more than 20 years. He primarily focuses on the ways in which business ownership, tax and estate issues can impact long-term financial planning.

No Comments Yet

Comments are closed

Five Common Estate Planning Mistakes

time to read: 3 min