8 Estate Planning Mistakes You Don’t Want to Make

Almost 70 percent of Americans think estate planning is important, but only 26 percent actually have an estate plan, according to a 2024 survey.

Failing to plan or starting too late can lead to mistakes—often very costly ones. Cleaning them up “is part of what keeps lawyers in business,” says Tereina Stidd, director of education with the American Academy of Estate Planning Attorneys.

Planning ahead can help you reduce taxes, speed up the distribution of your estate, provide for your children in case you die young, protect beneficiaries’ inherited assets from potential lawsuits and creditors (if the trust is irrevocable), and head off family feuds.

Even if you don’t have a lot of money or any kids, learning the basics can help you avoid the most common estate planning mistakes. Here are some of them:

1. Failing to plan.

If you die without a will or trust, your assets will go through a court proceeding known as probate where they will be divided up among your closest relatives according to your state’s “intestate succession” laws, regardless of your intentions.

Some types of assets don’t go through probate and won’t be subject to this court-ordered distribution, as long as they have named beneficiaries. These include retirement accounts such as IRAs and 401(k) plans, life insurance policies, and bank accounts and securities held in a “payable on death” or “transfer on death” account. Property you own with a spouse or another person as joint tenants also avoid probate. Usually, assets held in a trust can also skip the probate process, though there are exceptions.

Probate can be costly and cumbersome. “In California, I have one situation where it took a year and a half to distribute an account that was $400,000,” says Clay Stevens, director of strategic planning with Aspiriant in Orange County, California.

However, most states have a simplified process for smaller estates.

2. Forgetting to name beneficiaries.

To save your heirs time and money, be sure to designate beneficiaries on life insurance, retirement, and bank and brokerage accounts, as well as review them periodically as your family grows or shrinks.

“The retirement account is basically a contract with the financial institution. It is not an asset that is controlled by the will,” says Woody Rowland, a tax and estate-planning attorney in San Rafael, California. So if your will says your IRA goes to your son, but you designated your daughter as your IRA beneficiary, the daughter will get the IRA.

3. Neglecting to set up a trust, especially if you have children.

If you have assets outside of retirement accounts and/or children, there are some compelling reasons to set up a trust accompanied by a will:

• Assets you transfer into a trust usually won't have to go through probate, and you can control when and to whom your assets will be distributed. You can name yourself (and spouse if married) as trustee(s) so you can manage, change, or revoke the trust during your lifetime. You can also name a “successor” trustee to take over when you die or become incapacitated.
• Some trusts can help protect your beneficiaries’ inherited assets from potential creditors and lawsuits.
• You can place assets in a “special needs trust” to provide for disabled beneficiaries without jeopardizing their eligibility for government benefits.
• If you have a blended family, you can provide for children from a previous marriage and your current spouse in a way that could prevent conflicts after your death.

4. Failing to fund your trust.

A trust is almost pointless if you don’t transfer assets into it. This is usually done by changing the title on your assets—including your home, bank, and investment accounts—into the name of your trust. Most people name their trust after themselves and the date it was created, such as “The Robinson Family Trust dated June 30, 2024.” 

You can name your trust as the beneficiary of retirement accounts and life insurance, but it’s not always wise.

5. Misunderstanding taxes.

Every person, during their lifetime and upon death, can leave a certain amount of money that is not subject to federal gift or estate tax. This exemption amount, which was just $675,000 from 2000 to 2001, has been increasing for years. Now that it stands at $13.99 million per person in 2025, federal estate tax is not an issue for most people. (Some states including Oregon have their own estate or inheritance tax.)

Even if your estate will never be large enough to trigger estate taxes, there are other tax implications that could save—or cost—you a bundle. Suppose you bought stock for $50,000 and now it’s worth $1 million. If you give the stock to your children while you are alive and they sell it, they will owe capital gains tax on $950,000. If they get it after you die, the entire difference between $50,000 and its value on your date of death will escape capital gains tax. 

If you want to give away money while you are alive, “give cash to the kid and give the appreciated asset to charity,” since the charity will not owe tax, says John Sensiba, managing partner of accounting firm Sensiba LLP in Pleasanton, California.

Sensiba adds that some people are afraid to give away money while they are alive because they don’t understand gift taxes. In fact, gift taxes rarely apply to the recipient, only the giver. And in most cases they will never apply.

In 2025, each person can give away up to $19,000 per recipient—in cash or other assets—without any gift tax consequence. A husband and wife could give their son $38,000 and his spouse another $38,000 without incurring gift tax. The recipients won’t owe gift or income tax, but if the gift was an appreciated asset, they likely will owe capital gains tax when they sell it.

If you give any person more than $19,000 in one year (this limit changes annually), you will have to file a gift-tax return. But you won’t owe tax on it immediately. Instead, the excess amount will come out of your lifetime gift and estate tax exclusion, which is currently $13.99 million. If your estate never reaches that amount, you’ll never pay gift tax.

6. Not considering state taxes.

Twelve states impose their own estate tax, and all have a smaller exemption than the generous federal one. Generally, these states levy the tax on physical assets in their state, even if the owner lives out of state.

“Oregon has an estate tax rate of 10 to 16 percent that applies to estates above $1 million,” the lowest in the country, says Bryce Kaufman, an estate planning attorney with Myatt & Bell in Portland. Even if you don’t live in Oregon, if you have assets such as real estate or a business in Oregon, their value over $1 million would be subject to Oregon’s estate tax.

7. Not sharing your plans. 

“Not everyone agrees with me, but it’s better to let your beneficiaries know, while you are alive, who is getting what,” Stidd says. This is especially true if you are not giving everyone an equal amount and imperative if you have a blended family. “You can better manage beneficiary expectations. Many things will come to light that the [heads of the family] were not aware of because they had this conversation with the beneficiaries.” Maybe they will change their minds, but even if they don’t, it will give everyone a chance to be heard.

“Some people don’t want to tell kids they are getting a bunch of money because it could affect their long-term work ethic. I have other clients who want to tell them so they can make proper life decisions,” Stevens says.

When parents have shared this information, “I have seen it change how kids behave, not necessarily for the better.” But he also had a client whose daughter was working 60 hours a week and didn’t think she could afford to have children. When she found out she had a trust fund, she changed jobs to achieve better work-life balance, Stevens says.

8. Overlooking other documents. 

In addition to an estate plan, everyone should draft a power of attorney and an advance health care directive. These documents let someone you have named handle your financial affairs and make medical decisions if you cannot. “There is usually a long period of disability when one needs help so those two documents are really important,” says Kim Schwarcz, a professional fiduciary in Marin County, California.