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10 Biggest Estate Planning Mistakes

Help your clients avoid these common pitfalls

Most people only grow old and die once, which means, generally, that they only need one estate plan -- and anything you do only once, you’re likely to do poorly. That’s why it’s important for wealth managers and financial advisors and estate planners to help their clients get it right the first (and only) time.

Here are 10 mistakes your clients can make when setting aside wealth for future heirs, as noted by our colleagues at Financial Planning.

1. Procrastinating 1. Procrastinating

While some of us would like to think we’re immortal, the time will eventually come when all of us will meet our maker. That’s why it’s important to push clients to have their own estate plan, before it’s too late, and state laws intervene by creating one for them.

2. The DIY Mentality 2. The DIY Mentality

While a “do-it-yourself” mentality may be admirable for some things, it is often wise for clients to seek a professional advisor when treading the murky waters of estate planning.

3. Failing to Think from All Angles 3. Failing to Think from All Angles

Sometimes clients get too invested in a particular planning approach, and forget to look at the big picture. While advisors should offer solutions to clients, they should also provide clients with “what-if” scenarios, so that they are fully prepared for what might go wrong.

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4. Divorce 4. Divorce

Often clients do not take into the account that they might get divorced. As a contingency, clients can place restrictions on the money in the trust being distributed outside of the family. Or they could use a discretionary distribution standard that gives discretion to the trustees.

5. Missing the Fine Print 5. Missing the Fine Print

The fine print in estate planning documents can be the difference between retirement in the Bahamas or in a trailer home. To avoid being manipulated by the fine print, make sure the client and any professional advisors involved has dotted every "i" and crossed every "t."

6. Forgetting Pets 6. Forgetting Pets

Sometimes, clients forget to consider pets, and so when they die, their pets often have to follow them to their grave. Set up a pet trust to care for animals after the client dies.

7. Failing to Update All Documents 7. Failing to Update All Documents

Failure to update or title clients’ other documents may erase any benefits that estate planning documents offer. Make sure the client re-titles the assets in the name of the trust, not themselves, for clarity. And check regularly to ensure that beneficiary designations on all retirement documents are up to date. (They might not want that $1 million to go to their deadbeat ex-spouse anymore.)

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8. Underestimating Trusts 8. Underestimating Trusts

Some clients assume that trusts are only for minor children. In actuality, trusts are asset-protection vehicles for the entire family, and can protect the assets from the claims of creditors.

9. Failing to Consider Digital Assets 9. Failing to Consider Digital Assets

When a client dies, their spouse or other heirs may not have access to the password for digital assets. As a result, there’s value that they can’t get to. To prevent this, make sure that clients have a list of all their online user names and passwords, and that the appropriate family member or trustee has access to the information.

10. No Passing on of Digital Libraries & Music Collections (Yet) 10. No Passing on of Digital Libraries & Music Collections (Yet)

As of this writing, clients cannot pass their digital libraries and music collections down to their heirs, due to terms of service of the major sellers of digital content. While this may change in the future, clients will just have to accept this fact for now.



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