Estate planning can provide families with peace of mind and protect assets for future generations. However, despite careful intentions, certain missteps may result in unintended distributions, increased tax burdens, or disputes among heirs. Awareness of pitfalls like the ones below and timely revisions can reduce legal delays and maintain family harmony.
1. Failing to Update Estate Documents
Life events like marriage, divorce, or the birth of a child may render existing documents obsolete. Without revisions, a former spouse might retain rights to property or assets intended for another individual. Failure to revisit trusts and wills after significant changes can produce distributions that conflict with current intentions. Retirement plan beneficiary designations often override wills, so an outdated form could divert large account balances to unintended parties.
Periodic reviews align documents with personal circumstances and legal developments, reducing the potential for challenges.
2. Not Changing Contingent Beneficiaries
Primary beneficiary designations often receive focused attention, yet failure to appoint alternates may lead to intestacy rules governing asset distribution. When a named individual predeceases the account holder or declines the inheritance, assets pass according to state law rather than personal preference. This outcome can generate conflict among surviving kin and trigger lengthy probate procedures.
Identifying contingent beneficiaries provides a clear succession path, enabling smooth transfer of assets without reliance on default statutes. Thoughtful selection of alternates can preserve family unity and decrease legal costs by limiting uncertainty for fiduciaries and heirs.
3. Forgetting to Consider Tax Liabilities
Estate and gift taxes, as well as income taxes on certain transfers, can diminish the value of an inheritance. Assets subject to stepped-up basis rules require careful handling to minimize capital gains exposure for heirs. Transfers made during lifetime may incur gift tax obligations, while certain trusts may generate taxable income for beneficiaries.
Failure to account for these implications could erode resources intended for future needs. Incorporating strategies such as credit shelter trusts, charitable remainder trusts, or qualified personal residence trusts can help mitigate tax burdens. Professional advice tailored to current tax law can preserve more wealth for successors.
4. Ignoring the Dangers of Informal Asset Transfers
Informal arrangements such as joint tenancy with right of survivorship or transfer-on-death designations may appear convenient but can yield unintended consequences. Creditors may claim assets held in joint tenancy, and joint ownership can create exposure to another party’s liabilities. Informal transfers may bypass provisions for special circumstances, such as minor children or beneficiaries with disabilities. They may also conflict with instructions set forth in a formal will or trust, creating confusion and potential litigation.
A comprehensive planning strategy should integrate these devices within a coherent structure to align with overall goals and protect assets against unforeseen claims.
5. Failing to Appoint Powers of Attorney and Health Directives
Failing to appoint a durable power of attorney and a health care directive can leave decisions in the hands of courts or individuals lacking intimate knowledge of personal wishes. Without a power of attorney, financial matters may require court-appointed guardianship, often accompanied by fees and delays. Absence of clear instructions for medical care may force loved ones to guess treatment preferences during moments of crisis.
These documents grant named agents authority to make financial and medical choices in accordance with stated directives, preserving autonomy when capacity is compromised. Including detailed instructions and selecting trusted agents can safeguard both the quality of care and financial stability.
Delaware County Wills and Estate Lawyers at Eckell Sparks Can Help You Protect Your Interests
Our Delaware County wills and estate lawyers at Eckell, Sparks, Levy, Auerbach, Monte, Sloane, Matthews & Auslander, P.C. can guide you through every phase of crafting and maintaining an estate plan. For an initial consultation, call our Media and West Chester, Pennsylvania offices at 610-565-3700 or submit our online form. We proudly serve clients in Delaware County, Chester County, and Montgomery County.