1. Beneficiary blunders

Having no beneficiaries named on retirement accounts and insurance policies, or failing to update beneficiaries often, is a very common error. If no beneficiaries are selected then your estate and all other assets may be subject to probate, delays, and more. If a beneficiary is not selected on an IRA that means that there is no option to do a stretch IRA. A stretch IRA allows a beneficiary to make distributions over the course of their life expectancy instead of all at once and avoids a higher tax. Forgetting to remove an ex-spouse from an IRA can have horrible consequences to your new spouse or family. Furthermore, if you don’t want your current spouse to be the beneficiary of your retirement plan, then they must agree to the other person.
 

2. “Selling” property for $1

While this may sound like a good idea to avoid taxes on the gain from highly appreciated land lots, there are a few issues with this approach.

1. The IRS will deem it as a gift if it is sold for less than market value
2. Your heirs will lose the “step up” value

For a bit of explanation let’s consider this example. I inherit a property valued at $1 million but is sold to me at $1. If I decide to sell that property I will have to pay taxes on the $999,999 gain.
 

3. Naming specific investments in your will

If an investment is named specifically then that investment must be given to the beneficiaries. That means that even if an investment isn’t owned anymore it must be bought and then given to the beneficiaries.
 
A will written long ago may have given a specific amount of shares of a company to some beneficiary. If those shares go up dramatically in price and the writer of the will no longer owns those stocks, then they must be bought and then given to the directed beneficiary.
 

4. Not thinking through a well-intended gift

Gifts with strings attached, such as giving a house with the stipulation of not selling it, can cause additional stress and legal fees to one’s beneficiaries. Situations can change and people may not be in the same location or have the same plans as they did 30 years ago. To avoid such a misight, be sure to consider the reasoning and possible negative outcomes of stipulations.
 

5. Leaving assets directly to a minor without dealing with guardianship issues

Use specific definitions. The open ended “for their benefit” can be used to abuse the money given to guardians.
 

6. Not planning for the death of a beneficiary

Consider this. I have two beneficiaries but one of them dies. Where does my money go? Does all of it go to the other beneficiary? Does some of it belong to the family of the one that died? The term as per capita (latin for “by heads” or per person) vs. per strirpes (latin for “by branch”, meaning each branch of the family receives a certain share.
 

7. Ownership mistakes and imbalances

If there are too many assets in one of the spouse’s names, then there could be additional taxes caused by having to transfer ownership. The more equal the ownership of assets is between the spouses the less likely there will be additional taxes after the first death.
 

8. Not having a residuary clause

A residuary clause will cover everything you didn’t specifically outline in your will. That includes assets you forgot to mention, assets you didn’t know you had, or even assets you didn’t have at the time.
 

9. Not planning for the unexpected

Think of how unexpected life can be. What happens if you or your spouse’s health suddenly declines? What about the divorce of your kid? Your kid’s creditors? Can your heirs handle that much money? Being aware of the possibilities becomes very important when planning an estate.
Having assets go to a trust can be a way to give the payments over time instead of all up front. A trust even has the option to not distribute the funds if the trustee deems them to be a danger to themselves.
 

10. Not dealing with your own mortality

The only thing certain about life is that it will end one day. You must come to face that reality or your family and loved ones could be ruined. Many things can go wrong after someone dies, but having a good plan and contacting an estate planning attorney can make the process much easier.