Legacy preparation can play a key role in any financial strategy. Legacy management lets you consider what happens to everything you’ve accumulated—and may continue to accumulate—throughout your lifetime. But far too often, we’ve seen this as something that gets overlooked. In a 2024 survey, Caring.com found that less than one-third of Americans had wills.
Often, people lack an estate strategy for several valid reasons: they don’t know how to get started, believe it’s a complicated process, or don’t think they have enough assets to need one.
Whether you’re newly married, starting a family, or nearing retirement, an estate strategy may be on your mind. We have helped clients craft legacy strategies for their families, and we want to share our experience and hopefully help you navigate some missteps we have seen others make over the years.
Here are 10 common estate management mistakes we’ve seen people make: Here are 10 common estate management mistakes we’ve seen people make:
1. Not having a comprehensive estate strategy
The biggest mistake many make is not having a strategy for their estates in the first place.1
According to one recent survey, only 32% of Americans have a will—the most basic document—in 2024, a 6% decline from last year.2 Some say they never got around to it, while others believe creating an estate strategy is only for the wealthy.
Without a comprehensive estate approach, your assets may not be distributed according to your wishes, and your family may face conflicts at a difficult time. Without a well-thought-out strategy, the legacy you spent a lifetime building may not be passed on as you intend.
Helping manage potential mistakes starts with a phone call. Many of our clients work with an estate team that includes an estate attorney and a certified financial account. A financial professional with a detailed understanding of your personal finance strategy can be a great addition to the team.
2. Not having additional documents, such as a Financial Power of Attorney or an Advance Health Care Directive.3
A will defines your wishes after you pass. It includes naming your executor for your estate and outlining what you’d like to happen to minors or anyone else requiring guardianship (such as someone with special needs). A will also describe how you want your property and other assets distributed.
A Financial Power of Attorney assigns someone the power to make financial decisions for you, such as signing documents or making financial decisions, should you become incapacitated or otherwise unable to do so yourself. Without it, if a person becomes incapacitated, the family can face difficulties when deciding how to support their loved one.
An Advance Health Care Directive empowers the person you designate to make decisions about your medical treatment, including end-of-life care. In addition, this document often specifies what care and decisions you wish for in certain medical situations. Having a document that lays out your wishes can be seen as an act of love because it removes some of the burden from your loved ones.
3. Not considering trusts4
Understanding the difference between a will and a trust is essential before deciding which is best suited to assist with your estate goals.
A will is a basic instruction manual detailing how your assets will be distributed upon death. It can include critical decisions, such as who will care for minor children. However, wills have limits and are not the only choice to consider in estate management.
A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of the beneficiary (you) for beneficiaries. Typically, trusts bypass probate court, allowing your assets to be transferred more quickly than if handled using a will.
Trusts can be simple or complex, based on your needs, and they can be arranged to execute almost anything you wish.
There are several situations where a trust may help, including the following:
- You have multiple heirs.
- You’re passing assets to your grandchildren.
- You want to add conditions to an inheritance.
- You want part of your wealth to go to charity.
- You have a large estate with various considerations.
Remember, using a trust involves a complex set of tax rules and regulations. Trusts have benefits and limitations, so before moving forward, we encourage our clients and prospects to work with professionals familiar with the relevant rules and regulations who can offer guidance on trust strategies.
4. Not considering the impact of the expiration of the Tax Cuts and Jobs Act.
The 2017 Tax Cuts and Jobs Act (TCJA) increased the lifetime estate, gift, and generation-skipping transfer tax. In 2024, the exemption amount was $13.61 million for individuals and $27.22 million for married couples at the federal level. Unless Congress acts, the law will expire, and the exemption will revert to its 2017 level, adjusted for inflation. The TCJA expires December 31, 2025.
According to Forbes, as we approach the Great Wealth Transfer—with more than $84 trillion expected to pass to younger generations in coming decades—the clock is ticking to develop a strategy incorporating the TCJA’s features.
So, how can you take advantage of the law now? Here are two ideas that you might consider:
- Spousal Lifetime Access Trusts (SLATs): A SLAT is an irrevocable trust you can create for your spouse, through which you can gift all or a portion of your estate tax lifetime exemption. Your spouse will have access to these assets during their lifetime since they will be the beneficiary. This grants you the benefit of removing assets from your taxable estate by using up your federal estate tax exemption amount. If you do this in 2024, you can fund the trust up to $13.61 million. Waiting until 2026 may lower the allowable contribution. Spouses can also consider setting up dual SLATs designed to benefit each other. There are downsides to SLATs, some of which may occur if you divorce or are predeceased by your spouse.
- Dynasty Trusts: These irrevocable trusts can be structured to last as long as the trust’s creator has living descendants. They can utilize the trust creator’s gifts and generation-skipping transfer tax amounts. Transferring property to a dynasty trust through a taxable gift and a sale to the trust might help manage tax exemption amounts. While a dynasty trust can help, remember that future generations may feel restricted by the trust’s terms.
As mentioned above, using a trust involves a complex set of tax rules and regulations. We encourage working with a professional who understands your situation before moving forward with any decisions.
5. Not accounting for non-financial assets
Maybe you have important things in your home, such as sentimental artifacts or family heirlooms. Those in charge of your estate may not know that, so you may want to outline for them if you wish heirlooms to stay in the family rather than being sold or donated. A letter of instruction can provide insights into non-financial assets.
6. Not providing access to digital tools
Most people have digital tools, such as photos uploaded to a cloud filing system or social media profiles. Your loved ones may not even know what tools you have; however, even if they do, your estate strategy can grant them access.
7. Not reviewing your estate strategy periodically1
Not reviewing your estate strategy regularly can result in unintended consequences and legal issues. An outdated strategy may not reflect your current wishes or circumstances and may no longer match your estate goals. Here are some life events that may prompt you to consider changes to your estate strategy:
- Birth of a child
- Death of a primary/secondary beneficiary
- Death of your minor child’s guardian
- Marriage or divorce
- Purchase of a new property
- Starting a new business
- Death of your estate executor
You may want to use these as "trigger events" to remind you to review your strategy. Even if there are no changes to your situation, you may want to meet periodically with your estate team to discuss whether your estate strategy reflects current best practices in estate management.
8. Putting your child’s name on the deed to your home5
Parents sometimes put an adult child’s name on a deed to transfer property. Unfortunately, this can sometimes backfire because listing your child's name on the deed gives them the title to your home. While you may trust your child implicitly, it’s important to remember that they would now own your house in this scenario, and unforeseen issues can arise.
Working with your estate team, you may learn alternative strategies for including your child’s name on the deed to your home.
9. Naming a single beneficiary6
Having more than one beneficiary designated for your assets is a sound long-term strategy. If the stated beneficiary passes away, a contingent beneficiary can help guide the estate process. Pro tip: You can always have more than one contingent beneficiary listed. But it’s helpful to be as specific as possible with your estate instructions.
10. Not communicating with your family7,8
Failing to communicate with your family about estate decisions and intentions can lead to misunderstandings and legal challenges. Your family may not preserve your legacy as you intended. With limited knowledge of your intentions, your heirs may not be fully prepared to manage the assets and responsibilities of inheriting your estate. Communicating expectations with your family can help.
A 2023 study discussed how emotions about inheritances can divide families. When speaking to heirs, the study found that 30% of those whose parents passed away said their parents did not do a good job discussing how their money would be handled. Among those cases, 56% said that a lack of communication led to financial complications and issues after the parent’s death. Don’t let this happen to your family.
Consider having an open and honest discussion with your family about your estate strategy and involving them in the process. While it may be a complicated conversation to start, it’s critical for all involved.
Get professional support
Failing to involve professionals in developing and implementing your estate strategy can result in missed opportunities. That’s when you can assemble your estate team. As financial professionals, we often act as the “quarterback” of this team, coordinating activities, getting everyone on the same page, and bringing our perspective to the table.
The time to start thinking about your estate is now.
Talking about what happens after you are gone is never easy. Most of the common estate mistakes we’ve discussed can be managed if they are addressed early in the process. By taking the time upfront, you can put your family in a position to address issues after you are gone. We can work together to develop a comprehensive estate strategy that focuses on your needs and goals. The gift of preparedness may mean more than you think to those you care most about.
1 InvestmentNews, December 13, 2023
2 Caring.com, April 22, 2024
3 FindLaw.com March 12, 2024
4 SmartAssets.com, February 7, 2022
5 FindLaw.com, March 4, 2024
6 TrustandWills.com, April 2024
7 AAG, October 17, 2023
8 Edelman Financial Engines, December 4, 2023