What are common Estate Planning mistakes? What’s the worst that can happen with a flawed Estate Plan? How do I avoid probate? How can an Estate Plan help me save on taxes, and help my loved ones get what I intend for them? Can I write my own Estate Plan? Can I use an Estate Plan that I download from the internet? How do I NOT screw up my estate?
By James L. Cunningham Jr., Esq.
It’s shocking how often people with the best intentions end up creating complete disasters with flawed Estate Plans—or more commonly, no Estate Plan at all.
I’m talking about truly painful outcomes that can destroy the legacy you’ve worked so hard to achieve: family feuds, lost fortunes, tax nightmares, and years-long court battles that all could have been avoided.
As an Estate Planning lawyer for 30+ years, I’ve seen too many people screw this up—usually in ways they didn’t realize until it was too late. In this article, I speak the truth. I will be blunt, and I do want to scare you a little so you will finally take action.
If you think you’ve got it covered just because you drafted a Last Will & Testament years ago or filled out a do-it-yourself trust template online, you might be in for a rude awakening. Estate planning mistakes in those documents, or letting those documents get out-of-sync with new situations, can haunt your family for years, put your heirs at the mercy of a probate court judge, and cause family rifts that last a lifetime.
Below are some of the most common ways people screw up their Estate Plans—and how you can avoid them. Want help to do it right? CunninghamLegal provides comprehensive Estate Planning and reviews of Estate Plans, including advanced tax planning, business law, and business succession planning. Please consider contacting us for a complete look at your situation.
1. Not Having a Complete, Updated Estate Plan When You Die, Thereby Forcing Your Family to Go to Probate Court
First things first: if you don’t have an Estate Plan, your family is likely in for a world of hurt.
I’m not exaggerating. No Estate Plan means your heirs will have to suffer through a prolonged legal “probate” which often proves to be a nightmare. Trust me: probate is an ordeal you do not want to inflict on your loved ones.
What is probate? It’s the court-supervised process of distributing your assets when you die, and it’s as bureaucratic and inefficient as it sounds. It’s slow, expensive, and painfully public.
Yes, public. In probate, all your debts, assets, and private financial affairs are laid bare for the world to see. It often takes 16 to 24 months to get through probate in California (and in complicated or “messy” cases it can take much longer). If you own property in other states, your estate will have to go through probate in each of those states too – potentially adding years to the process.
It’s also common for multiple parties to show up in court looking for a piece of an estate in a formal probate process. No doubt you’ve heard those stories of celebrity families fighting over their fortunes. The same happens in much smaller estates.
Here’s a brief overview of the probate process in California, just to give you a taste:
He Gave His Family Years of Probate Hassles in Multiple States
Consider “Hector.” Hector was smart—Hector invested in real estate and owned properties in California, Oregon, and New York. Hector had a Will but no Living Trust. When Hector passed away, Hector’s estate had to go through probate not just where he lived in California, but in all three states, because in most cases a Will does not prevent probate. Each state had its own process, its own fees, and its own red tape. Hector’s family didn’t just have to deal with one probate; they had to endure three separate processes with three different sets of rules. That meant hiring lawyers in three states and watching legal fees and court costs spiral. The court process took years and cost tens of thousands of dollars.
What’s the Cost of Probate Court?
Probate fees typically run between 4% and 8% of the total fair market value of the estate. In California, probate fees are based on the gross value of your estate—not what’s left after paying off debts! So, if you own a million-dollar house with a $900,000 mortgage, the probate fees are still calculated on the full million. You’re looking at about $50,000 in probate fees on that one asset alone! Half of that goes to the attorney, and half goes to the executor. We have a probate fee calculator on this site which should scare you.
Probate is meant to protect creditors, and your family is left footing the bill. It’s like a lawsuit you file against yourself to protect your creditors. Why do this to your loved ones when you can avoid it?
Probate’s core purpose is to pay a deceased person’s creditor – not to provide for their family.
The solution? Set up a Living Trust. A properly created Living Trust helps keep your estate out of probate, saves your family thousands, and helps your assets get distributed quickly and privately. But there’s a catch: you have to fund your trust, which I’ll talk more about later in this article. Lots of poorly drafted and unfunded trusts still end up in probate—so you do need to get professional help and do it right.
A properly crafted and “funded” living trust is the opposite of Probate: a Living Trust’s core purpose is to provide an inheritance for “beneficiaries” (inheritors and heirs) after the death of the person who created the Living Trust.
2. Thinking That a Valid Will Is Sufficient to Avoid Probate
Is creating, signing, and notarizing a valid “Last Will and Testament” enough to keep your family out of probate? No, it is not. A Will is an important part of an Estate Plan, but for most people, it’s not enough to avoid probate.
Let me repeat that and put it in bold letters: a Will alone will not keep your family out of probate. I can’t tell you how many clients come into my office thinking that just because they have a Will, their family is protected from court battles and public filings. Wrong.
Although the weight of a Will varies by state, in general a Will is simply a list of “wishes” to guide the probate court. It’s usually not legally binding until a judge says it is. So, even if you’ve spelled out exactly what you want to happen, the probate judge has the final say. That means your family still has to go through the court system to get your assets distributed.
Take the case of Charlie, an only child. Charlie’s parents each created a Will that left everything to the other, and then to Charlie after they both passed. Sounds simple enough, right?
Not so fast.
When Charlie’s parents passed away, Charlie discovered that everything still had to go through probate because Charlie’s parents hadn’t set up a Living Trust. Charlie had no access to the estate for more than two years, during which time Charlie had to deal with court filings, legal fees, and headaches. Charlie’s parents were well-intentioned in creating Wills, but it ended up being a ticket to probate hell.
3. Failing to Create a Living Trust to Pass On Your Assets
So, what should you do? Let me repeat: create a Living Trust, which acts like a “bucket” to easily hand assets from one generation to the next. A Living Trust is often the best way to help your estate avoid probate entirely. And unlike a Will, a trust is a private document that doesn’t have to be filed with the court. That means no public scrutiny and no court delays.
You must set up your Living Trust while you are alive—it can’t be done by your heirs after you pass away. While you are alive you can amend it as many times as you wish, but you need to get it done…ASAP. We have lots of information about the many kinds of trusts on this website (see our blogs and webinars), but here’s an overview of Living Trusts, including typical costs. Contact us to set up an appointment.
Failing to create a Living Trust can be a pretty surefire way to screw up your estate.
4. Allowing Your Estate Plan to Become Outdated and Stale
You might be thinking, “Well, I already have a Living Trust as part of my Estate Plan, so I’m good, right?” Not necessarily. An outdated Estate Plan can be worse than no plan at all. Estate laws change, your financial situation changes, your health changes, and your family situation changes constantly— if you don’t update a stale plan, you could be setting up your heirs for a real mess.
Let me give you an example of a common culprit, the old-school AB trust, a type of Estate Planning structure that was common in the 1980s and 1990s. Back then, the federal estate tax exemption was much lower—around $600,000 per person. The AB trust was designed to split an estate into two parts: one for the surviving spouse’s half of the property (the “A” trust) and one for the deceased spouse’s half of the property held for the surviving spouse (the “B” trust), to help shield the estate from taxes.
Fast forward to today. The estate tax exemption is presently about $14M per person. Most people don’t have an estate that large, so they don’t need the complicated old-school AB trust anymore. But if you still have one and it’s not updated, it could cause a huge capital gains tax problem for your heirs.
I once had a client, we’ll call her Delta, whose outdated AB trust created a half-million-dollar tax nightmare for the family. When Delta’s spouse passed away, half of their estate went into the “B” trust for Delta, while the other half remained in the “A” trust for Delta to do whatever Delta wanted to do with the property.
Years later, when Delta passed away, Delta’s heirs had to pay over $500,000 in taxes on the assets in the “B” trust. Why? Because those assets didn’t get a new cost basis when Delta died, and the family was stuck with a massive capital gains tax bill. If Delta had taken steps before death, Delta’s heirs could have avoided that tax entirely!
The moral of Delta’s story: Work with an experienced Estate Planning lawyer to keep your Estate Plan up to date. Review it every few years, especially after major life changes like a birth, death, divorce, or significant financial shift. An Estate Plan from the 1990s or early 2000s might not reflect today’s laws or your current financial or family situation.
Those old-school AB trusts have largely been replaced by more modern, nuanced and sophisticated AB, ABC and ABCD Trusts for people with larger estates, typically over $10M.
5. Allowing Beneficiaries of Life Insurance, Bank Accounts, Investment Accounts, and IRAs to Go Out-of-Date
People often screw up their estates by failing to update the beneficiaries on life insurance policies, bank accounts, IRAs, annuities, and other investment accounts. This can lead to substantial disasters—and probate court—down the line.
Begin by remembering that for most banking, investment, and similar accounts, the beneficiary designation on file at the institution can override anything stated in your Will or Living Trust. Hence, updating your Will or Living Trust is almost never enough as time goes by.
For example, what if you named your spouse as the beneficiary of your life insurance policy, but did not update your policy when they passed away? Your other heirs will likely have to go to probate court to resolve the issue.
When you had that third child, was their name added as a POD (Payable on Death) beneficiary to your investment account? When you divorced your first spouse, was their name removed as a beneficiary of your IRA?
I have seen shocking situations in which a spouse divorced three or four decades ago reappears to claim an account or insurance payout on which their name still appears!
Let me add an important note on beneficiary designations: work with your estate lawyer to understand when it is appropriate and when it is not appropriate to name a Living Trust as a beneficiary of an insurance policy or other financial vehicle. Sometimes it makes sense and sometimes it definitely does not—depending on your personal circumstances. For example, it is rarely appropriate to name a Living Trust as the beneficiary of an IRA. (IRAs can be a complex special case which may require specialized estate planning all on their own.)
Finally, some people have a false belief that estate planning is a DIY project and use of Joint Tenancy, POD, TOD and other beneficiary designations can eliminate the need for a Living Trust centered estate plan. In the real world, these plans often blow up causing stress, grief, heartaches and animosity among the people who inherit – something that the loved one who died never intended.
6. Writing Your Own Estate Plan or Copying One Off the Internet
One of the major mistakes people make is trying to DIY their Estate Plan.
I get it. It seems cheaper and easier to use an online service or download a template from the internet, rather than paying a lawyer. But Estate Planning is not a simple, one-size-fits-all project. DIY Estate Plans are often a disaster waiting to happen.
Let’s take the hypothetical example of Mike. Mike goes online with a DIY service and creates a quick Estate Plan with a Living Trust that simply says to divide his estate equally and outright between his three children, Romeo, Sierra, and Tango.
Okay, but now let’s look at these heirs more carefully. Romeo has been disabled since childhood and has no income source, relying only on government benefits. Sierra has gambling issues and is headed for a divorce. And it turns out that Tango dies before Mike, leaving two minor children of his own.
What happens when Mike dies with his simple DIY Estate Plan that takes none of these special circumstances into account? Well, Romeo may lose government benefits when Romeo inherits. Sierra will have full control over Sierra’s inheritance right away and will likely gamble it away—if Sierra’s divorcing spouse doesn’t get control of half of it first. Tango’s kids will receive Tango’s share, but it will have to go through probate for Tango and they will get it all at the irresponsible age of 18!
All three of those disasters could have been prevented by a savvy estate attorney setting up the right kinds of specialized trusts with independent Trustees to protect and dole out the money appropriately to each heir.
Changing a car tire is a DIY project; Estate Planning is not. It’s complicated. There are legal nuances, tax implications, and family dynamics that a DIY template simply cannot address.
Writing the plan is actually a small part of the work. The most important work a qualified lawyer will do is talk through your situation and diagnose the issues, well before writing any plan.
At CunninghamLegal, it’s our job to understand your situation thoroughly and then use our expertise to craft just the right solution for your family. Contact us for an appointment.
7. Making Verbal Agreements or Family Loans Without Properly Documenting Them in Your Estate Plan
Here’s another disaster in the making: undocumented verbal agreements, unrecorded gifts, and undocumented loans. Parents often loan or give money to their children, especially for big expenses like a down payment on a house—with various agreements about paying them back or subtracting them from inheritances. But when these agreements aren’t properly put in writing, they can lead to messy family disputes after you’re gone.
Take India and Juliette who have two children together. They loaned their children Kilo and Lima $100,000 each to help them buy homes. They told the kids, “If the loans aren’t paid back, we’ll just deduct it from your inheritance when we die.”
Nice. But guess what? India and Juliette never recorded the loans in writing in their Estate Plan.
Kilo paid back the loan in full. But Lima didn’t. After India and Juliette passed away, Kilo insisted that Lima’s unpaid loan should be deducted from Lima’s share of the inheritance, as was consistent with the verbal agreement. Lima refused and argued the $100,000 was a gift. Without any documentation or promissory note, the Trustee was left in a tough spot and unable to enforce the original agreement. The siblings ended up in a bitter dispute that lasted for years.
Verbal agreements don’t hold up in court. If you loan or gift money to a family member, make sure it’s documented in detail and included in your Estate Plan. Whether it’s a loan, a gift, or an advance on their inheritance, put it in writing. This will save your family from future conflicts and prevent legal battles that could tear them apart.
8. Secretly Updating Your Estate Plan Without Telling Anyone
Another mistake is creating what I call the “Secret Estate Plan.” This happens when you update your Will or Living Trust but don’t tell the people involved. This can lead to chaos and confusion after you’re gone, especially if your Executor or Trustee isn’t aware of the changes.
Picture this: Echo was named as the Executor & Trustee of Echo’s father’s estate, and started distributing assets according to the 2012 Living Trust Echo’s father had in place. But halfway through the process, the family discovered that Echo’s father had made major changes to the trust in 2015, in a document he filed away in the back of a safe in his den.
The new trust completely altered how the assets were to be distributed, but Echo had already begun paying out the estate based on the old instructions.
The result? A legal and financial nightmare. Correcting the distributions meant more legal fees, paperwork, confusion, chaos, and a lot of stress for Echo and the family. If Echo’s father had simply communicated the changes to Echo, they could have avoided the whole mess.
The lesson: consider Communicating your Estate Plan. Make sure your Executor or Trustee knows where your Estate Plan is kept, is aware of any changes, and understands their role in carrying it out. It’s also a good idea to update all the key people—Executor, Trustee, non-whacko Beneficiaries—when you make major changes to your Estate Plan. If your changes create family issues, it’ll be much better that you are around to handle the impact than to leave time bombs in your Will & Trust.
If you have whacko beneficiaries, that is, people who are best kept in the dark about a future inheritance, it may be better to NOT inform them.
Believe me, the last thing you want is for your key decision-makers and loved ones to be blindsided by an unfamiliar plan that they weren’t expecting.
9. Not Paying Attention When Your Estate Lawyer Retires or Dies
You might be surprised to hear this, but one of the common Estate Planning disasters can happen when your Estate Planning lawyer retires, dies, or simply disappears. People assume their lawyer will be around forever to help with Trust Administration and all the legal tasks that need to be done after a person who creates a Living Trust dies, but the reality is that lawyers retire, they pass away, or they might just stop returning calls or emails.
What happens when your Estate Planning lawyer is no longer around to assist your family? It might be fine, but it might not. If you haven’t made a backup plan, it can leave your heirs scrambling to find crucial documents or another lawyer who may not be familiar with the complexity of your estate.
My recommendation? Build a relationship with an Estate Planning firm that has multiple attorneys and long-term support. At CunninghamLegal, we make sure our clients are never left without a resource. We’ve handled transitions for clients whose original estate attorneys have retired or passed away, and we’re always available to help with their Estate Plans, so they can be carried out as intended.
Indeed, as of this writing, we have assumed responsibility for more than 28 separate legal practices that were discontinued as attorneys retired or passed away. Please consider contacting us to book an appointment.
10. Failing to Completely Fund a Living Trust
This is certainly one of the most common and costly mistakes people make with their Estate Plans: failing to properly fund their Living Trust.
Setting up a trust is only half the battle. If you don’t actually transfer your assets into the trust, it’s worthless. Your assets will still go through probate court, which defeats the whole purpose of setting up a trust in the first place.
I’ve seen this mistake more times than I can count.
Able and Baker, for example, had a Living Trust in place for years. But when Able passed away, we discovered that the family vacation home—one of their largest assets—was still in Able’s name alone, not in the trust. This meant the home had to go through probate, costing the family both time and money.
As I said, a trust is a kind of legal bucket, designed to make transfer of ownership easy. But an empty bucket is worthless. Make sure you’re transferring all of your appropriate major assets into the trust, including your home, investment accounts, bank accounts, and any other property.
11. Moving Certain Assets into Trusts That Don’t Belong There
I say “appropriate assets” because some assets generally do not belong in your Living Trust, including IRAs, other retirement vehicles, life insurance, annuities and some other categories.
I don’t have space to go into the reasons here, because they are complex and the decisions depend on your individual circumstances—but you must talk to your qualified estate lawyer to do funding properly. Putting the wrong assets in a Living Trust can create its own set of disasters. You can learn more in this blog & webinar about funding a Living Trust.
12. Failing to Properly Title Assets
Do you have properties that are still only in your name and not re-titled to your trust?
Circumstances change, and titling must be constantly reviewed and updated. Did you buy a new property? Open a new investment account? Without the proper funding steps, your Estate Plan is simply incomplete.
Periodically review your trust funding to look for any new assets that need to be properly titled in the name of the trust, and consult a qualified estate lawyer if you have any doubts about how to title it correctly.
If an asset is incorrectly titled, your family may be forced into probate court to clean things up.
13. Not Considering the Potential Unintended Consequences of Joint Tenancy When Owning Property
You will definitely want to seek legal advice from a savvy lawyer – like one at CunninghamLegal – when it comes to titling a property held by two or more people as “Joint Tenants” or “Tenants in Common.”
The key difference between joint tenancy and tenancy in common is that in Joint Tenancy, all owners have equal shares of the property and the surviving owner automatically inherits the deceased owner’s share (right of survivorship), while in Tenancy in Common, each owner can hold a different percentage of the property and their share passes on to their heirs according to their Estate Plan upon death, not automatically to the other owners. Here’s a quick video about Joint Tenancy and the right of survivorship.
Joint Tenancy is often the default choice for property owners, but it can cause a lot of unanticipated consequences.
For example, imagine that Able buys a property and then years later adds a business partner, Charlie, as a Joint Tenant. That will probably be considered a gift for tax purposes—and when Able dies, Charlie will end up with the property. But what about Able’s spouse Baker?
If Able is married to Baker and Able uses community property funds to buy property as a Joint Tenant with Charlie, when Able dies, who owns the property? Does Able’s surviving spouse Baker own half of the property or does Charlie own all of the property? Ultimately, a judge will decide.
The bottom line? Don’t make decisions about ownership and titling of property without the advice of a qualified estate lawyer, or you may end up creating the recipe for a disaster years from now. You can learn more in this webinar on ownership and titling options. Or please contact us to discuss your special situation.
14. Not Considering Use of a Trust Protector When Creating a Living Trust
An Estate Planning tool that not everyone knows about is the Trust Protector. A Trust Protector is different from a Trustee. The Trust Protector is a neutral third party, usually an experienced attorney, who has power over the trust but is not a trustee. This can include the power to make changes to a trust under specific circumstances, filling a vacancy in the office of trustee, removal of a trustee (helpful for asset protection), and generally keeping a Trust out of Probate Court. This is especially important for long-term trusts or trusts that hold assets for minor children or beneficiaries with special needs.
When you die, your revocable trust becomes irrevocable, and cannot be altered without the help of a Trust Protector, or a costly and uncertain Probate Court process.
Here’s a common example: What if a successor Trustee doesn’t want to serve, and there’s no second-in-line named? Without a Trust Protector to change the trust, a Probate Court is likely the only path to name a new Trustee.
Or let’s say you set up a trust for your grandson, with the assets to be distributed when he turns 25. But what if your grandson is diagnosed with a serious health condition at age 24, and receiving those assets could disqualify him from important government benefits? In that situation, a Trust Protector could step in to adjust the terms of the trust, protecting your grandson’s financial future without having to go through Probate Court.
Trust Protectors can add vital flexibility to your Estate Plan during Trust Administration, allowing for changes in circumstances, tax laws, or family needs.
15. Failing to Keep Backup Copies and Digital Copies of Your Estate Plan
In my home state of California, many people lose their homes to natural disasters every year – largely due to wildfires, landslides, and the occasional earthquake. Imagine that you die in a natural disaster and your Estate Plan, stored in the bottom drawer of the desk in your bedroom, is lost with you. It happens.
All manner of natural and manmade disasters litter the evening news almost daily. You should never have just one set of original hard copies of your Estate Planning documents. That’s a recipe for disaster. Always keep multiple copies as well as digital copies of your documents, preferably in different locations, such as one set in a home office and another set in a safe deposit box.
If there is no digital copy and the original copy is destroyed, there may be no record that the Estate Plan exists. In that case, you will have to recreate all documents that are not filed elsewhere—or your family will end up in probate court, maybe for years.
At CunninghamLegal we offer at no additional charge to keep digital copies of all documents we prepare for our clients. Contact us to learn about our comprehensive Estate Planning & Trust Administration Services.
16. Not Realizing You Don’t Know What You Don’t Know
I could, of course, go on—there are plenty of other ways to screw up an Estate Plan. Naming the wrong person as your Successor Trustee. Naming no backup to your Successor Trustee. Leaving substantial assets to an heir facing bankruptcy. The list is pretty much endless.
Most people make these mistakes because they simply don’t realize the topic is complex and they need to work with an expert who thinks about these issues every day.
Here at CunninghamLegal we have an extensive library of videos on our YouTube page, and we give regular free legal webinars on Estate Planning issues. I also invite you to read my bestselling book, Savvy Estate Planning, which is subtitled “What You Need to Know Before You Talk to the Right Lawyer” because you really should be an educated client, even when you work with a qualified lawyer.
The key? Recognize that you don’t know what you don’t know, and making assumptions can lead to disaster.
The Bottom Line: Take All the Steps Needed to Protect Your Family and Your Legacy
Avoiding probate, minimizing taxes, and preventing family disputes all come down to careful, thoughtful planning with a qualified estate lawyer. Regular reviews, proper funding, and communication with your heirs are all essential to making sure your plan works when it’s needed most.
I recommend reviewing your Estate Plan at least every three years, or after any major life event—whether that’s a birth, a death, a divorce (yours or your heirs’), a remarriage, a home purchase, or really, any significant financial change.
What Do We Do?
The lawyers and staff at CunninghamLegal help people plan for some of the most critical times in their lives; then we guide them when those times come.
Make an appointment to meet with CunninghamLegal for Estate Planning, Tax Planning, Business Law, and much more. We have offices throughout California, and we offer in-person, phone, and Zoom appointments. Just call (866) 988-3956 or book an appointment online.
Many clients tell us they find our legal webinars incredibly helpful and informative. We cover a wide range of issues related to Estate Planning, as well as retirement, taxes, trusts, probate, living in California, asset protection, and many other topics.
We look forward to working with you!
Best, Jim
James Cunningham Jr., Esq.
Founder, CunninghamLegal
We guide savvy, caring families in the protection and transfer of multi-generational wealth.
