Home » Blog » Common Mistakes Made During Estate Planning & How to Dodge Them
Estate Planning Mistakes & How to Dodge Them - Werner Law Firm

Common Mistakes Made During Estate Planning & How to Dodge Them

Troy Werner and his family

Written by Troy Werner

Troy Werner has been an indispensable asset to The Werner Law Firm since joining in 2009, providing exceptional legal service to its clients.

Get To Know Troy!
POSTED ON: July 17, 2019

An estate plan and make or break your family’s financial future. When misapplied, estate planning mistakes can cost your loved ones hundreds of thousands of dollars in legal fees and lost assets. On the other hand, a well-executed estate plan can mean that nearly every cent of what you own flows flawlessly to your loved […]

An estate plan and make or break your family’s financial future.

When misapplied, estate planning mistakes can cost your loved ones hundreds of thousands of dollars in legal fees and lost assets.

On the other hand, a well-executed estate plan can mean that nearly every cent of what you own flows flawlessly to your loved ones, allowing you to leave a lasting financial legacy on top of your legacy as a parent, sibling, child, friend, and accomplished individual.

However, the difference between a misapplication and a successful estate plan is often subtle at best. Simple estate planning mistakes can turn into expensive errors costing time and money.

While it can be costly to properly set up an estate plan, it’s well worth it in nearly every case. But the absolute worst-case scenario is investing heavily in an estate plan only for a mistake to catch you off-guard and leave your loved ones wide open for serious legal fees and massive headaches after your passing.

To avoid the worst-case scenario, it’s vital to have a sit down with an estate planning professional.

Although far from complete, this list can potentially help you understand how even the smallest estate planning mistakes can end up becoming very costly.

Not Having an Estate Plan

Getting the first one out of the way, it’s often a better idea to be prepared than it is to leave your assets up for the state to distribute on its own time, and on your family’s dime.

When a person dies, everything they own must go through probate, a potentially expensive and very slow process often tying assets up for months to come – unless a comprehensive estate plan is prepared to bypass the majority of the probate process.

Not all estates must pass through probate, as smaller estates may file for an expedited probate process. But if your assets and accounts amount to a sizeable sum, it’s wise to consider how to best avoid having your wealth entangled in red tape.

Furthermore, an estate plan does more than just help distribute your assets to your loved ones.

An estate plan may often be the only way to assign a guardian for your underaged children, ensure that your pets are taken care of after death, and ensuring that your accounts and medical decisions are in the hands of someone you trust should you be left alive yet completely incapacitated.

“Selling” a Home for a Dollar

One of the more common ways to “gift” a home to a family member is to sell it for a dollar – yet selling a home vastly under its real value greatly undermines your children, if you’re intending to bypass the limit on the gift tax by “selling” property to your beneficiaries instead.

The IRS will count any property sold vastly under value as a gift anyway, and if resold, your children will have to pay the appropriate tax reflecting the home’s real value rather than the amount you sold it to them for.

In other words, selling property to your loved ones vastly under market price will come with several vital hidden costs, which can often be fatal for your family’s financial future.

Gifts are good and should be used to lower your overall estate tax. But there’s a limit to how much you can gift before being taxed for each gift.

Putting Your Child’s Name on the Deed

When you simply change the deed on a property to reflect that your child now owns it, you’re essentially gifting that property.

Depending on the total value of the property, doing so might hit you with an unexpected tax in the tens of thousands of dollars.

Utilizing a trust to pass property over to your child results in no gift tax, instead safely moving the property into their ownership without potentially taking a considerable chunk out of your current wealth.

Poorly Choosing an Executor

The executor of an estate plan is typically the person in charge of handling the logistics of moving property and wealth from one person to another.

An executor is typically in charge of a last will and testament or a trust but may be in charge of several aspects in a person’s estate plan.

A competent executor will be able to accurately catalogue and move all assets, ensure timely distribution, settle all of the deceased’s affairs and ensure that all debts and outstanding accounts have been settled, and effectively “complete” the estate plan.

However, these tasks can require a considerable amount of organization, and represent a sizeable time investment.

Some people aren’t up to the task and choosing the right person for the job is critical.

Failing to Name a Beneficiary

Some estate plans are never completed due to an untimely death or procrastination.

This can result in serious problems in the probate process, as an estate planning document is effectively useless if it does not properly name its beneficiaries.

It’s crucial that you make clear who is entitled to what after you pass away, through revocable trusts, a last will, and other accounts and properties that allow you to name beneficiaries (retirement accounts, life insurance policies, certain properties, etc.).

Not Planning for a Beneficiary’s Death 

While unfortunate, it does happen that a beneficiary can pass away before you do, often before you have time to amend your estate plan.

In most cases, clauses can be added to trusts and to your will to clarify who an asset should go to should the original beneficiary pass away.

Usually, if no other beneficiary is listed, the asset automatically passes to the beneficiary’s next of kin.

Having No Pour Over Will

Estate plans are often built specifically to avoid the delay caused by probate, meticulously moving assets through trusts and other instruments to reduce the total value of a person’s remaining estate.

However, last-minute inheritances and changes in ownership can sometimes beef up a person’s estate before they have the time to change their estate plans.

This is where a pour over will comes into play. This is a type of last will and testament that specifically calls for all remaining assets to automatically be funded into a named living trust, to successfully bypass probate.

Not Updating Your Estate Plan

An estate plan is not a one-and-done affair. While ideally updated every five years, it’s critical to update an estate plan whenever:

  • A major change occurs in the family (death, birth, marriage, divorce, alienation).
  • A major change occurs in estate tax laws.

Both of these can drastically affect how you should handle transferring your assets after death, and failing to update your estate plans may lead to legal disputes over who receives what, as well as surprise taxes due to an older estate plan not taking into account recent changes in estate tax laws.

These are just a few potential estate planning mistakes that can easily spell disaster.

Thankfully, avoiding them is often simple.

Regularly reviewing your estate plan with a professional can help your family save thousands of dollars in potential legal fees later down the road and can provide you with the peace of mind you need when dealing with potential inheritance issues.

Share This Post

Why Our Living Trust Law Firm & Probate Attorneys?

Founded in 1975 by L. Rob Werner and serving California for over 48 years, our dedicated attorneys are available for clients, friends, and family members to receive the legal help they need and deserve. You can trust in our experience and reputation to help navigate you through your unique legal matters.

Whether you need help creating a living trust or navigating probate, our living trust law firm's compassionate team of estate planning lawyers and probate lawyers are here to help you and ready to answer your questions.

Our goal is to make your case as easy as possible for you. Hiring a lawyer can be a daunting task, but it doesn’t have to be. From the moment you contact our firm, through the final resolution of your case, our goal is to make the process easy and understandable. We cannot change the fact that probate is a long and complicated process, but through our Werner Law Firm Difference, we strive to go out of our way to keep you informed of your case through every step of the way. We are constantly refining our processes and procedures for a more streamlined and calm client experience. Our goal is to have you feel like a burden was lifted from your shoulders, and that we made the whole process an easy one

If you're dealing with a legal matter, we urge you to schedule a free initial appointment today and join the many satisfied clients who have contacted Werner Law Firm.

Book an Initial Call Now

Join Our eNewsletter and our California Estate Planning and Probate Blog Digest

Werner Law Firm logo
The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship. See full disclaimer here.
Santa Clarita, CA Office

27433 Tourney Rd, Suite 200
Santa Clarita, California 91355

Los Angeles, CA Office

445 S. Figueroa St., Suite 3100
Los Angeles, California 90071

Bakersfield, CA Office

4900 California Ave, Tower B-210
Bakersfield, California 93309

Newport Beach, CA Office

23 Corporate Plaza Dr., Suite 150
Newport Beach, California 92660

Lancaster, CA Office

626 W Lancaster Blvd.,
Lancaster, California 93534

Pasadena, CA Office

35 North Lake Avenue, Suite 710
Pasadena, California 91101

Simi Valley, CA Office

2655 First St, Suite 250
Simi Valley, CA Office, California 93065

Encino, CA Office

15760 Ventura Blvd, Suite 700
Encino, California 91436

Oxnard, CA Office

300 E Esplanade Dr., 9th Floor
Oxnard, California 93036

Santa Barbara, CA Office

7 W. Figueroa St., Suite 200
Santa Barbara, California 93101

IMS - Estate Planning and Elder Law Practice Growth Advisors
Powered by