Broker Check

Estate Planning Pitfalls

| October 25, 2017
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Many people want to leave a legacy after they’ve passed, and in most cases, it’s a financial legacy. This can come in many forms, but for those who have specific plans to leave a legacy to an individual, group of individuals, or organization, careful planning must be done.

However, in the process of planning, it’s not uncommon to come across a few pitfalls while preparing for the future. Here’s a few we’ve come across:

  1. Not updating beneficiaries

    This is one of the most frustrating and difficult mistakes to deal with for the surviving family members or organization(s). If someone has changed their will or trust, they must also change their beneficiaries on their accounts separately. These work independent of each other, and both require updates.

    It is also something that is typically very easy to update. While paperwork is required at times, it can be done online or by phone. All the more reason to check your beneficiaries!

  2. Transferring real estate or other assets while still living

    In an attempt to simplify the estate or become eligible for government assistance programs, retirees often transfer their real estate or other assets while still living, instead of at death.


    There are multiple problems with this. First, the government has a “look back” period to determine when assets were transferred. If they were transferred within the “look back” period, they could cause someone to be ineligible for government assistance.

    Second, the recipient of the asset will inherit the original investment cost, rather than having it “stepped up” to the date of death through the estate. The original investment cost is likely less, often much less, than what it would be if the asset was transferred through the estate. This significantly increases capital gains tax for the recipient.

  3. Failing to consider the tax implications of your estate.

    The federal government has increased the previous limitation of taxable estate assets. For 2017, the Federal estate tax limit is $5.49 million, per individual.


    It’s easy to think that your estate assets will have minimal tax implications. However, there are state estate tax levels that need to be carefully planned for, as well as inheritance taxes that will vary from state to state. There could also be individual income taxes due when the inherited assets are sold.

    There are numerous ways to reduce the tax impact of your estate. For example, while life insurance is often included in the estate tax calculation of the decedent, it may be free of federal income tax to the recipient.

We often talk about having a financial plan for your retirement, but having an estate plan is just as important. Why have someone else – the government – determine how your estate assets should be split? Take the time now to put together estate documents and ensure you have the proper beneficiaries listed.

Ideally, these are things you should be discussing with an estate attorney in the state you reside in. If we can be of assistance in any way, please let us know.

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