The 10 Biggest Estate Planning Mistakes-and How to Avoid Them

Estate planning is about more than creating a will and putting important documents in a safe place. A well-designed estate plan should reflect current circumstances, provide clear instructions, and help loved ones know what to do when difficult decisions arise.

Unfortunately, many estate plans fall short—not because people don't care about planning, but because of small oversights, outdated documents, or assumptions that can create problems later.

Here are 10 of the most common estate planning mistakes and practical steps that can help avoid them.

1. Waiting Until There Is a Crisis

One of the biggest mistakes is putting off estate planning until it becomes urgent.

Illness, an accident, a death in the family, or a major financial change can happen unexpectedly. Without an estate plan, state law generally determines how certain assets are distributed, and a court may need to become involved in managing an estate or appointing someone to make decisions.

How to avoid it: Start estate planning before there is an emergency. Even a basic plan can provide important protections, and it can be expanded as circumstances change.

2. Creating an Estate Plan and Never Updating It

Creating an estate plan is not a one-time event. Life changes, law changes, and an estate plan may need to change with it.

Marriage, divorce, the birth or adoption of a child, a death in the family, a move to another state, a significant change in finances, or the purchase or sale of property can all be reasons to review an existing plan.

How to avoid it: Review an estate plan regularly and after major life events. Even when no changes are necessary, a review can confirm that the plan still reflects current instructions.

3. Choosing the Wrong People to Make Important Decisions

Estate planning documents often name people who will have significant responsibilities. These may include an executor, trustee, financial power of attorney, health care decision-maker, or guardian for minor children.

Choosing someone simply because they are a family member or because they might expect the position can create problems if that person is not prepared for the responsibility.

How to avoid it: Choose people based on qualities such as reliability, organization, judgment, communication skills, and willingness to serve. It may also be appropriate to name alternate decision-makers.

4. Forgetting About Beneficiary Designations

Some assets pass outside of a will (outside of probate) based on beneficiary designations. Examples can include certain retirement accounts and life insurance policies.

This means that simply having a will does not necessarily determine where every asset goes.

An outdated beneficiary designation can create unintended results—for example, a former spouse or someone who has passed away may still be listed.

How to avoid it: Review beneficiary designations regularly and make sure they coordinate with the overall estate plan. Remember that beneficiary designations can be just as important as the documents themselves.

5. Failing to Consider Incapacity

Estate planning is often associated with what happens after death, but planning for incapacity is just as important.

An unexpected accident or illness could leave someone temporarily or permanently unable to manage finances or make certain decisions. Without appropriate documents, family members may have difficulty stepping in.

How to avoid it: Consider documents that address financial and health care decision-making during incapacity. Make sure the people appointed understand their responsibilities and know where the documents can be found.  If you update documents, provide the people with the most recent version.

6. Not Planning for Minor Children

Parents of young children have an additional concern: what happens to their children if both parents are unable to care for them?

Without appropriate planning, a court may need to determine who will serve as guardian.

Estate planning can also address how assets intended for children should be managed. Simply leaving money directly to a minor may not provide the structure or protection a family intended.

How to avoid it: Parents should consider naming guardians and creating an appropriate plan for managing assets for minor children. Review those choices as children grow and family circumstances change.

7. Assuming a Will Avoids Probate

A common misconception is that having a will means the family will avoid probate.

In reality, a will generally directs how probate assets should be distributed; it does not, by itself, avoid the probate process.

Whether probate is necessary depends on factors such as the type of assets involved, how assets are titled, beneficiary designations, and applicable state law.

How to avoid it: Understand how each major asset will be transferred at death. Depending on the circumstances, the appropriate application of tools such as trusts, beneficiary designations, joint ownership, or other planning techniques may be appropriate.

8. Ignoring Digital Assets

Modern estates include much more than bank accounts, real estate, and personal belongings.

Digital assets can include email accounts, online banking, photographs, social media accounts, websites, cryptocurrency, subscriptions, and other online accounts.

Family members may not even know what accounts exist, much less how to access or manage them.

How to avoid it: Create a secure inventory of important digital accounts and explain where access information can be found. Avoid putting sensitive passwords directly into an estate planning document that may become part of a public court record.

A secure password manager or other appropriate storage method may provide a better solution.

9. Failing to Communicate Important Information

Even a carefully prepared estate plan can be difficult for family members to use if no one knows where the documents are located or who should be contacted.

Loved ones may also be unaware of important financial accounts, insurance policies, property, business interests, or other assets.

How to avoid it: Create an organized system for storing important documents and information. Consider telling trusted family members or decision-makers where important documents can be found and who they should contact when needed.

This does not necessarily mean sharing every detail of the estate plan. It means making sure the right people can find the information when it matters.

10. Trying to Handle Everything Without Professional Guidance

Estate planning documents can look straightforward, but estate planning involves more than filling out forms.

Asset ownership, beneficiary designations, tax considerations, family dynamics, business interests, real estate, trusts, and state-specific laws can all affect how an estate plan works.

An estate plan that looks appropriate on paper may not accomplish its intended purpose if the various pieces do not work together.

How to avoid it: Consider working with an experienced estate planning attorney who can review the complete picture and help create a plan that fits the family's circumstances and goals.

Estate Planning Is About More Than Documents

The biggest estate planning mistake may be thinking that estate planning is simply about signing a will and putting it in a filing cabinet.

A complete plan considers who should make decisions, who should receive assets, how those assets should be transferred, what happens during incapacity, and how the plan should change as life changes.

The goal is not simply to have documents. The goal is to have a plan that works when it is needed.

*This is for educational purposes only.  It is not to be construed as legal advice.  You should contact competent legal, tax, and financial advisors.

Compass Rose Law Firm, 1830 W Fulton St. Rapid City, SD 57702, (605) 721-3958