Estate planning is one of the most important – and often overlooked – areas of wealth management. The stakes are particularly high: not having an up-to-date, comprehensive estate plan can result in financial losses, family disputes, and a long, costly probate process. Regardless, many people continue to make avoidable mistakes that can profoundly affect their wealth and legacy.

Don’t put yourself – or loved ones – in that scenario by proactively addressing these mishaps in your estate plan.

Mistake 1: Failing to Plan for Estate Taxes

Estate taxes (also known as inheritance or death taxes) can take a hefty chunk out of your estate, reducing the amount that will pass on to your heirs. This can be troublesome for estates that may exceed exemption limits or fail to take advantage of tax-saving strategies.

Failing to plan for these taxes could result in an unnecessary tax burden that could diminish your wealth – and in extreme cases, require the sale of valuable assets, such as real estate, business interests, or investments.

Plan for:

• The federal estate tax exemption is relatively high at $13.61 million per individual (double for couples) for 2024 and $13.99 million per individual for 2025 – but estates that exceed this amount will be subject to estate taxes.
• Some states, like New York, also impose their own estate or inheritance taxes.

Strategies to consider:

• Utilize lifetime gifting strategies: Take advantage of the annual gift exclusion ($18,000 in 2024 and increasing to $19,000 in 2025) to gift assets to heirs during your lifetime. This reduces the taxable value of your estate.
• Establish trusts: Certain types of trusts, such as irrevocable trusts or charitable remainder trusts (CRTs), can help reduce your taxable estate while supporting charitable causes.

How to Prepare to Create a Trust
Trusts are a common tool used in estate plans to detail out your wishes and legacy making it a powerful document for loved ones handling your estate. Creating a trust can seem overwhelming, but our simple checklist will break down the process for you.
Get your step-by-step guide
• Consult with your estate and tax teams: Work with your estate planning attorney, tax advisor, and financial advisor to create and tailor a plan that plans for both federal and state estate taxes – all while planning potential tax law changes down the road.

Mistake 2: Having Outdated or Unassigned Roles in Your Estate Plan

Over time, life circumstances change. Children grow older, business interests evolve, relationships change, and the value of assets fluctuates. A failure to update your estate plan regularly can lead to confusion, disputes, or unintentional beneficiaries. Learn four signs it’s time to review your estate plan here.

→   Learn four signs it’s time to review your estate plan.

Plan for:

• Without clear, assigned roles or up-to-date provisions in your estate plan, the wrong people may oversee important decisions, such as administering your estate, managing your finances, or taking care of your minor children. This can lead to delays, mismanagement, and conflicts among family members or heirs.

Strategies to consider:

• Review your estate plan annually: Regularly assess whether the people you’ve designated to manage your estate (executors, trustees, guardians for minor children) are still appropriate. Confirm that your roles align with your current family and financial situation.
• Choose trusted, competent executors and trustees: It’s crucial to appoint individuals who are not only trustworthy but also financially savvy and capable of making decisions in a high-pressure environment.
• For complex estates, you may want to consider hiring professional fiduciaries or corporate trustees. Using a corporate trustee shifts the burden to a third-party while providing professional management of trust assets. As a corporate trustee, we handle all the back-office paperwork – filing of income tax returns for the trust, communication with beneficiaries (including obtaining any budget from a beneficiary), any accounting or statements to beneficiaries, manage any court filings, establish how the trust assets are to be invested, and independently vet distribution requests.
• Communicate your intentions: Openly discuss your estate plan with your heirs and the individuals you’ve chosen to play key roles. This can help minimize surprises and avoid conflicts down the line.
• Inform and assign backup roles: Always have a contingency plan. Make sure there are backups in place for your key decision-makers in case they are unable to fulfill their roles.

Mistake 3: Not Having an Estate Plan at All

Perhaps the most detrimental mistake of all is not having an estate plan in place. The absence of a will or trust means that your estate will be subject to the state’s default laws, which may not reflect your wishes or best interests.

Building Your Legacy with an Estate Plan: A Guide for You and Your Family

For more, download our Estate Planning Guidebook, which includes planning recommendations for a variety of life stages and scenarios, a checklist to help you get started, and more.

Get your copy

Plan for:

• Without a will, state law dictates who inherits your assets. This may mean your wealth is distributed in a way that does not align with your family dynamics or long-term goals. Moreover, without a trust, your estate could be subjected to a public probate process, potentially exposing your financial affairs to scrutiny.

Strategies to consider:

• Create a comprehensive estate plan: At the very least, you should have a will to direct how your assets are distributed as well as a durable power of attorney for financial decisions and a healthcare proxy for medical decisions should you become incapacitated.
  →   Estate planning is just one of the many areas of financial planning that our team can help with. Schedule a call today to get started.

• Designate your heirs and beneficiaries: Make sure your will and any trusts outline who will inherit your assets and in which proportion. Include specific instructions for any personal items or family heirlooms.
• Create and fund your trust: If you have established a trust, make sure all applicable assets are properly transferred into it. Failing to fund a trust could render it ineffective, ultimately leaving your estate to go through probate.

Proper estate planning is crucial for preserving your wealth, cementing your legacy, and providing for future generations. It’s essential to stay ahead of potential pitfalls like the ones highlighted in this article. By taking the necessary steps to plan proactively, you can avoid unnecessary complications and secure your estate for your loved ones.

To avoid these common estate planning mistakes, work with your team of trusted advisors, including estate planning attorneys, tax professionals, and financial planners. Together, you can craft a strategy that not only protects your wealth but also reflects your personal values and goals, ensuring that your legacy lives on as you intend.

Please consult with an attorney or a tax or financial advisor regarding your specific legal, tax, estate planning, or financial situation. The information in this article is not intended as legal or tax advice.

Manning & Napier Personal Trust Services provided by Exeter Trust Company (ETC), a New Hampshire charted trust company and affiliate of Manning & Napier Advisors, LLC. Fiduciary trust and custody services are available through Exeter Trust Company.