Estate Planning Mistakes

10 Common Estate-Planning Mistakes

It would be a terrible thing to waste the assets you have worked hard all of your lifetime to build and accumulate. Yet the lack of proper planning can cost your heirs and favorite charities and cause headaches in the form of unnecessary estate taxes and probate fees. Charitable giving through estate planning need not be an “either/or” proposition. Your wishes for your heirs and trusted charities can both be addressed. There are 10 common mistakes to avoid so your family and trusted charities can benefit from your thoughtfulness.

1. Assuming you don’t need an estate plan
Because only a small percentage of estates actually pay estate taxes each year, some might think they don’t need an estate plan.  Even if estate taxes are not a concern planning your estate can save your family valuable time. Plus, if you don’t have a plan for your estate, the State of Mississippi has a plan for you!

2. Leaving all of your assets to your spouse
An unlimited amount of assets can be passed to your spouse free of estate taxes. However, with that type of plan, estate taxes simply are delayed. If the estate continues to grow in value, your spouse’s estate may owe taxes because of its increased value. That problem can be minimized or eliminated with the use of trusts (particularly a so-called “credit shelter trust” or “by-pass trust), gifting to family, gifting to your Community Foundation and other favorite charities, and other estate planning techniques.

3. Owning all assets in a “joint name” with your spouse
Assets jointly owned by spouses automatically pass to the surviving spouse. That technique may save probate costs, but it may increase the surviving spouse’s estate subjecting the assets to estate taxes.

4. Not having a Will
A Will is a legal document that allows you to choose who is to receive your property at your death. In addition, a will allows you to name a guardian for your minor children, appoint a personal representative and make gifts to your hometown’s community foundation fund and your other favorite charities.  Care should be taken that no gifts are titled directly to a minor.  A trust should be used to hold assets for a minor until at least age 21 or possibly older.

5. Assuming that a Will is a complete estate plan
A properly drafted will is only a cornerstone for many estates. To reduce estate taxes, save on probate fees, make health care directives, and provide for charitable gifts, additional planning might be in order.

6. Not making use of the annual gift tax exclusion for you and your spouse
Annually, you can make gifts up to up to the amount of the gift tax exclusion, and your spouse can give the same amount, to as many people as you want free of gift tax. That is an easy way to reduce the size of your estate and the possibility of paying estate taxes.

7. Not understanding the unified credit tax system
The system of taxing gifts you make during your lifetime and for the value of your estate at your death are connected. An understanding of that concept will allow you to take advantage of strategies to reduce future taxes by making gifts during your lifetime. For example, giving away assets that are growing in value during your lifetime removes the growth that could be taxed at your death.

8. Keeping life insurance in the estate
The death proceeds of life insurance are not subject to income taxes, but they are subject to estate taxes. If you have purchased life insurance to pay estate taxes – unless the insurance is owned outside the estate – you have only added to your estate tax problems. A solution to that problem is the use of an irrevocable life insurance trust.

9. Failure to update your estate plans
Certain events during your lifetime create a need to review and change your estate plans. Those events include marriages, deaths, births, inheritances, and tax-law changes.

10. Failure to keep good records
Can you imagine how difficult it will be for your family to sort out your estate if they don’t know where to find your will, insurance policies, bank accounts, and other valuable documents? We all dutifully fill out business records, credit forms, income tax returns, and other forms demanded by government agencies and those with whom we do business; yet we seldom seem to get around to completing one of the most important records for ourselves and family – a personal estate planning record.

Please click here for a unofficial organizer (a document where you can record that important information).  Estate Organizer


For more information please contact your Professional Advisor or us at or call 601.583.6180