Common mistakes made during estate planning

Avoiding the Pitfalls: The Most Common Mistakes in Estate Planning

Creating an estate plan is one of the most profound acts of responsibility and care you can undertake for your family. A well-crafted plan provides a clear roadmap, protects your assets, and ensures your loved ones are cared for according to your exact wishes. However, the path to a secure legacy is fraught with potential pitfalls. Over the course of decades in New York, we at Morgan Legal Group have witnessed firsthand how simple, common mistakes can undermine even the best intentions, resulting in family conflict, unnecessary taxes, and devastating legal battles.

These errors are not typically born from malice, but from a lack of information, procrastination, or the misguided belief that estate planning is a simple, one-size-fits-all task. The good news is that these mistakes are almost always preventable with proper guidance and a proactive approach. In this comprehensive guide, we will illuminate the most common and costly mistakes made during the estate planning process. By understanding these pitfalls, you can take the necessary steps to avoid them, ensuring your plan is a fortress of protection for your family’s future, not a house of cards waiting to collapse.

Mistake #1: Believing a Will Is All You Need

This is arguably the most pervasive misconception in the world of estate planning. Many people believe that once they have signed a Last Will and Testament, their work is done. They assume a will is a magic wand that transfers their property seamlessly and privately to their heirs. This could not be further from the truth. While a will is an absolutely essential foundational document, relying on a will alone is often an inefficient and inadequate strategy, especially for anyone who owns real estate in New York.

A will guarantees one thing: probate. Probate is the formal, court-supervised process of validating a will and overseeing the administration of an estate. This process in New York is notoriously slow, expensive, and completely public. By relying solely on a will, you are subjecting your family to a system that can take a year or more to navigate, all while their inheritance is tied up and the details of your estate are laid bare for public inspection. Understanding the limitations of a will is the first step toward building a truly effective plan.

The Reality of Probate in New York

When you die with only a will, your appointed executor must file it with the Surrogate’s Court in your county (e.g., New York County, Queens County, etc.). This kicks off the probate process, which involves several steps:

• Filing a petition and notifying all legal heirs.
• A waiting period during which heirs can object to the will.
• A formal court decree appointing the executor.
• The executor gathers all assets, pays all debts, and taxes.
• Filing a final accounting with the court.
• Finally, distributing the remaining assets to the beneficiaries.

This entire process can be a significant burden on your family during an already difficult time. The legal fees, executor commissions, and court costs can eat away at the inheritance you intended for your loved ones.

The Superior Alternative: The Revocable Living Trust

The modern and far more efficient solution is to use a revocable living trust as the centerpiece of your estate plan. A trust is a private legal agreement that allows you to transfer your assets into the trust’s name during your lifetime. You continue to control and manage these assets just as you always have. The key difference is that upon your death, the assets in the trust are not subject to probate. They can be managed and distributed immediately and privately by your chosen successor trustee according to your instructions.

By using a trust, especially for major assets like your home, you provide your family with several powerful advantages:

• You avoid the delays and costs of probate.
• You maintain complete privacy over your financial affairs.
• You provide for seamless management of your assets if you become incapacitated.

A will is still needed as a “pour-over” will to act as a safety net, but the trust becomes the primary vehicle for your plan. This combination of wills and trusts is the gold standard for modern estate planning.

Mistake #2: Failing to Fund Your Trust

This is the tragic and surprisingly common sequel to Mistake #1. A person understands the benefits of a trust, hires an attorney to draft a beautiful and comprehensive trust document, and signs it with all the proper formalities. They then take the document, put it in a safe deposit box or a drawer, and do nothing else. This is a catastrophic error. An unfunded trust is nothing more than a very expensive piece of paper. It is completely ineffective and will do nothing to help your family avoid probate.

A trust can only control the assets that are legally titled in its name. The process of retitling your assets from your individual name into the name of your trust is called “funding.” It is the most critical and often most neglected step in a trust-based estate plan. A great estate planning attorney does not just hand you a document; they guide you through the entire funding process to ensure your plan will actually work when it is needed. Our founder, Russel Morgan, Esq., has built our firm’s process around this crucial follow-through.

What Does “Funding a Trust” Actually Mean?

Funding a trust involves changing the legal ownership of your assets. This is not just a list on a piece of paper; it requires formal, legal changes. Here are some examples:

• For your house or co-op: You must execute a new deed or co-op stock power, transferring the property from “John Smith” to “John Smith, as Trustee of the John Smith Revocable Trust.”
• For your bank accounts: You must go to the bank and change the title on your accounts to the name of the trust.
• For your investment accounts: You must work with your financial advisor to change the ownership of your brokerage accounts to the trust.
• For your business interests: You must formally assign your LLC membership interest or corporate shares to the trust.

Each asset requires a specific procedure. Failure to complete these steps means the asset is not in the trust and will therefore still be subject to the probate process, completely defeating the purpose of creating the trust in the first place.

The Role of Your Attorney in the Funding Process

A dedicated estate planning firm will not leave you to navigate the funding process on your own. At Morgan Legal Group, our engagement includes:

• Preparing the new deed for your real estate.
• Providing you with detailed, written instructions and certification of trust documents to take to your financial institutions.
• Coordinating with your financial advisor to ensure accounts are properly retitled.
• Preparing the necessary assignments for your business interests.
• Following up to ensure that the funding process is complete.

This hands-on approach is the difference between having a plan on paper and having a plan that works in reality. When you get in touch with our team, you are getting a partner who will see your plan through to completion.

Mistake #3: Neglecting Beneficiary Designations

This is a subtle but incredibly destructive mistake. Many of a person’s most valuable assets are what we call “non-probate” assets. These are assets that pass to a chosen person by operation of law, completely outside of the will and the probate process. The most common examples are:

• Life Insurance Policies
• Retirement Accounts (401(k)s, IRAs, 403(b)s)
• Annuities
• Payable-on-Death (POD) or Transfer-on-Death (TOD) Bank Accounts

These assets are controlled by a simple document: the beneficiary designation form you filled out when you opened the account. This form is a binding legal contract with the financial institution. It acts as a “mini-will” for that specific asset, and it overrides anything you have written in your actual will. The number of families who have been devastated by an outdated beneficiary designation is staggering.

The Classic Horror Story: The Ex-Spouse Beneficiary

Here is the most common scenario: A young man names his wife as the beneficiary of his large 401(k) account. Years later, they go through a contentious divorce. He updates his will to leave everything to his new wife and their children. However, he forgets to change the beneficiary designation on his old 401(k). When he dies, his entire retirement account—perhaps the largest asset he owns—is paid directly to his ex-wife. His current wife and children receive nothing from that account. His will is completely irrelevant. The beneficiary designation form is king.

This is not a rare occurrence. It happens every single day. It is absolutely critical that you treat your beneficiary designations with the same seriousness as your will. They must be reviewed and updated as part of any comprehensive estate plan.

Coordinating Your Designations with Your Overall Plan

A good estate plan is a holistic plan. Your attorney should conduct a complete review of all your assets, including a thorough audit of all your beneficiary designations. The goal is to ensure that these designations work in harmony with your will and trust. For example, instead of naming an individual, it is often wise to name your revocable trust as the primary or secondary beneficiary. This funnels the asset into your trust, allowing it to be managed and distributed according to the more detailed and protective provisions you have laid out, rather than being paid out in a lump sum. This is especially important when minor children are involved, as they cannot legally receive a large sum of money outright.

Mistake #4: Choosing the Wrong Fiduciaries

Your estate plan is only as good as the people you choose to carry it out. These people are your “fiduciaries”—the individuals you entrust with the legal duty to act in the best interests of you and your beneficiaries. Choosing the right fiduciaries is one of the most important decisions you will make. Choosing the wrong ones can lead to mismanagement, family conflict, and the complete failure of your plan. This is a decision that requires careful thought, not a hasty appointment based on emotion or a sense of obligation.

The Key Fiduciary Roles in Your Plan

You will need to select people for several key roles:

• Your Executor: The person who manages your will through the probate process.
• Your Successor Trustee: The person who manages your trust after you are gone.
• Your Agent under a Power of Attorney: The person who handles your finances if you become incapacitated.
• Your Agent under a Health Care Proxy: The person who makes medical decisions for you.
• A Guardian for your minor children: The person who will raise your children.

Common Mistakes in Choosing Fiduciaries

People often make several predictable mistakes when choosing their fiduciaries:

Mistake: Choosing Based on Age or Birth Order

Many people automatically name their oldest child as their executor or trustee out of a sense of tradition. This is often a poor strategy. The oldest child may not be the most responsible, the most organized, or the most financially savvy. They may live across the country or have a difficult relationship with their siblings. You should choose the person who is best suited for the job, regardless of their age.

Mistake: Naming Co-Fiduciaries to Be “Fair”

Naming two or more of your children to act jointly as co-executors or co-trustees is often seen as a way to avoid hurting anyone’s feelings. In reality, it is often a recipe for deadlock and disaster. If the co-fiduciaries cannot agree on a decision, the estate can be paralyzed. It is usually far more effective to name one primary fiduciary and then name the others as backups or successors in a clear line of succession. This provides for a clear decision-maker and avoids unnecessary conflict.

Mistake: Not Asking the Person First

Serving as an executor or trustee is a significant and time-consuming responsibility. It is not an honor; it is a job. You should never name someone to a fiduciary role without first having a detailed conversation with them to ensure they understand the role and are willing and able to take it on. Naming someone who later declines the position will cause delays and may force the court to appoint someone you would not have chosen.

Qualities of a Good Fiduciary

When choosing your fiduciaries, look for these key traits:

• Trustworthiness and Integrity: This is the absolute, non-negotiable foundation.
• Responsibility and Organization: The role involves significant paperwork and deadlines.
• Good Judgment and Communication Skills: They will need to make decisions and communicate with beneficiaries.
• Willingness to Serve: They must genuinely agree to take on the role.

A good attorney will spend time with you discussing these choices and helping you select the people who are most likely to make your plan a success. To discuss the selection of your fiduciaries, you can schedule an appointment with our team.

Mistake #5: Failing to Plan for Your Own Incapacity

As discussed in our previous post, this is a critical and often overlooked area. Many people focus their planning entirely on what happens after they die, completely ignoring the very real possibility that they may have a long period of incapacity beforehand due to an illness or accident. Failing to plan for your own incapacity is a mistake that can lead to a public, expensive, and emotionally draining court guardianship proceeding. It is a complete loss of privacy and control at the most vulnerable time of your life.

The Two Documents That Prevent a Guardianship

As a reminder, the entire nightmare of a court guardianship can be avoided with two simple, powerful documents that you execute while you are healthy:

1. A Durable Power of Attorney: This allows your chosen agent to handle your financial affairs.
2. A Health Care Proxy: This allows your chosen agent to make your medical decisions.

These documents are not optional extras; they are a core, non-negotiable component of any sound estate plan. They are your shield against the public humiliation and expense of a guardianship proceeding.

Mistake #6: DIY or “Bargain” Estate Planning

The rise of online legal services has created the dangerous illusion that estate planning is a simple commodity that can be purchased for a low flat fee from a website. Using these DIY services is one of the most significant and irreversible mistakes a person can make, especially in a complex state like New York. An estate plan is not a product; it is a highly specialized legal service. The “bargain” price of a DIY plan is a mirage that often leads to tens or even hundreds of thousands of dollars in litigation costs, lost inheritance, and unnecessary taxes for the family left behind.

The Fatal Flaws of Online Legal Forms

DIY documents are a minefield of potential errors:

• Improper Execution: New York has very strict rules for how a will must be signed and witnessed. A layperson is almost certain to make a mistake, which can invalidate the entire document.
• Lack of Customization: A template cannot plan for a blended family, a child with special needs, a family-owned business, or the unique rules of a New York co-op.
• No Strategic Advice: A website cannot advise you on how to minimize New York’s estate tax or how to structure a trust to protect assets from elder law concerns like long-term care costs.
• No Funding Guidance: This is the critical failure of DIY trusts. They provide a document but offer no help with the complex legal process of actually transferring your assets into the trust, rendering it useless.

The true cost of a DIY plan is paid by your family in the form of stress, conflict, and lost wealth. Investing in professional counsel from a dedicated firm like Morgan Legal Group is the only way to ensure your plan is legally sound, strategically effective, and truly protective. For more information on legal standards, you can consult resources like the American Bar Association.

Mistake #7: The “Set It and Forget It” Mentality

The final and perhaps most insidious mistake is believing that estate planning is a one-time task. Creating your plan is a major achievement, but it is the beginning of a process, not the end. Your life is dynamic—your family, your finances, and your health will all change over time. The laws governing estates and taxes are also constantly evolving. An estate plan that was perfect ten years ago may be completely outdated and even dangerous today. An outdated plan can be just as bad as no plan at all.

Triggers for an Immediate Estate Plan Review

You should plan to review your estate plan with your attorney every 3-5 years as a matter of course. In addition, you should contact your attorney immediately after any of these major life events:

• Marriage or Divorce
• Birth or Adoption of a Child or Grandchild
• Death of a Spouse, Beneficiary, or Fiduciary
• A Significant Change in Your Financial Situation
• A Beneficiary’s Diagnosis with a Disability or Special Needs
• Moving to a Different State
• Changes in Federal or New York State Estate Tax Law

Treating your plan as a living document and building a long-term relationship with your attorney is the key to ensuring it will work when it’s needed most. This is especially true when dealing with situations that intersect with family law or when a loved one may be at risk of elder abuse.

Conclusion: Charting a Course to a Secure Legacy

Estate planning, at its heart, is about taking control. It is about replacing the uncertainty of default state laws and the chaos of inaction with a clear, intentional plan that reflects your values and protects your family. By understanding and actively avoiding these common mistakes, you can ensure that your journey through the planning process is a successful one.

To recap, the key is to:

1. Go beyond a simple will and use a trust to avoid probate and protect your privacy.
2. Diligently fund your trust to ensure it is effective.
3. Carefully review and coordinate all of your beneficiary designations.
4. Thoughtfully select the right fiduciaries to carry out your plan.
5. Plan for your own potential incapacity with a power of attorney and health care proxy.
6. Reject the profound risks of DIY planning and invest in professional counsel.
7. Treat your plan as a living document and review it regularly.

At Morgan Legal Group, we are committed to helping our clients navigate this process with confidence. We provide the expert guidance and personalized strategies you need to avoid these pitfalls and build a plan that provides true peace of mind. Your legacy is too important to be left to chance or compromised by a preventable error.

Take the definitive step to protect your family and your life’s work. Contact Morgan Legal Group today to speak with our experienced team, or schedule a comprehensive consultation and let us help you build a plan that stands the test of time.

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