13 Common Financial Mistakes in Estate Planning

Death is an unfortunate reality of retirement.

But I’m sure you want to be fully prepared when the inevitable day comes.

You don’t want your friends and family picking up pieces of your life while they grieve.

If you don’t want to leave your family a mess to clean up… then a proper estate plan is essential for your retirement.

The unfortunate truth is that most people haphazardly plan for the finish line.

I often see people make mistakes that cause pain and frustration for their loved ones. Because they don’t know the rules or consult an expert… they subject their loved ones to years of probate court, time, and expenses.

Don’t make simple mistakes with your estate.

Here’s a list for you of common mistakes I see with estate planning. Make sure you’re not making these mistakes in your own life!

  • Assume that your will is going to take care of all the details
    Beneficiary designations (on IRA, 401K, brokerage..etc.) trump what’s in your will. If you set up a trust, designate the trust as the beneficiary. Don’t use a person’s name… even if they are due to inherit the money.
  • Give your heirs an avoidable tax bill
    If you don’t designate beneficiaries on your IRA… your heirs won’t maintain tax-advantaged growth over their lifetimes (via a stretch IRA). Without a beneficiary, your IRA money will go through probate. And your family (excluding spouses) will be required to withdraw the money within five years. This incurs an immediate tax bill. And it makes all subsequent earnings and capital gains subject to income taxes.
  • Trigger probate on life insurance proceeds
    If you name your estate as the beneficiary of your life insurance, it becomes subject to probate. Instead, name an individual or a trust as beneficiary for life insurance.
  • Forget to update forms when life happens
    Just as bad as failing to name a beneficiary… is having the wrong beneficiary. Beneficiaries can marry, divorce, come of age, or tick you off. That’s how exes and bitter sisters-in-law get rich.
  • Not having a Plan B
    If your primary beneficiary isn’t around to collect, and no secondary beneficiary is named… the court decides who gets your money.
    Be exact. You can name multiple primary and secondary beneficiaries.
    Don’t be afraid to spell out how you want your assets divided.
  • Name minor children as beneficiaries
    Until age 18 or 21 (depending on state laws), minors can inherit only limited amounts. Designate a financial guardian or set up a trust for a minor. Either of these need detailed directions on how to manage the windfall until the children are of age.
  • Disinherit kids from a first marriage
    Houses, bank accounts, and other assets held jointly go right to the co-owner. No matter what your will states. This can leave children from a previous marriage no rights to contest.
    You can prevent this. Use beneficiary designations on assets that carry no spousal or joint ownership constraints.
  • Overlook others you want to take care of
    Estate laws favor spouses. Payable- or transferable-on-death accounts automatically go to the closest living relative. It will not go to a charity or life partner unless designated otherwise.
  • Fail to get permission to bequeath your qualified retirement plans
    By law, spouses are first in line to inherit retirement funds and assets. (subject to right-of-survivorship laws) If you wish to leave the money to someone else, your betrothed must sign a written waiver… or the deal is off.
  • Assume your wishes are on file
    Don’t take it on faith that a beneficiary form you filed 30 years ago is still there. Or that when you switch plans, your beneficiary form automatically transfers. Get copies from every bank, fund, and insurance company. Regularly.
  • Update forms incorrectly
    Marking up beneficiary forms and initialing your changes won’t hold up in court. To override your old requests, make changes in writing. And give a copy to the institution where the original is (hopefully) on file. Then get copies – regularly.
  • Keep your plans a secret
    Have a record of all your assets, wishes, and plans. Let your loved ones know where to find those records. You don’t want your loved ones scrambling to figure things out while they’re grieving.
  • Misspell names
    You must correctly spell the full legal names of all your heirs. You must also provide the correct Social Security numbers, if requested. You don’t want to cause your loved ones pain because of a typo.


At Independence Wealth, we help our clients stay on top of their estate plans. We leave nothing to chance. We know the estate planning process inside and out… so we ensure that our clients have a rock-solid plan in place. And we keep everything up-to-date so there’s no surprises for your heirs.