Some of the Biggest Estate-Planning Mistakes People Make
Will your legacy be a benefit or a burden to your loved ones? It depends on how well you've planned.


There are some things we just don’t like to think about, much less speak about. The universal truth is we are all going to pass away one day. The legacy you leave can either simplify the process of dealing with your personal and financial property, or it can be a worrisome burden for those you leave behind.
Legacy planning is as important as your final wishes. So, as much as you avoid the topic, it can’t be — and shouldn’t be — ignored.
When discussing this subject, I like to point out to people that it is often the smallest things that can come back to bite you. I’m reminded of the proverb that says, “For want of a nail, the kingdom was lost.”

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
So let’s take a look at what you should discuss with a qualified attorney to help make sure your kingdom — and your legacy — isn’t lost.
There are several common mistakes people can make when planning — or not planning — for what will happen with their estates when they die. A few of those mistakes include:
Lack of a see-through provision on a trust.
This can prove very costly. For example, consider a couple who has a $1 million Individual Retirement Account (“IRA”) and the beneficiary of the IRA is a trust. If there is no see-through provision on the trust, the couple’s estate could potentially owe several hundred thousand dollars in taxes when the IRA is passed to beneficiaries due to the higher tax rates trusts are often subject to. In certain circumstances, a trust may be an appropriate beneficiary for an IRA.
A “see-through trust” refers to a trust that meets specific legal requirements and serves as the named beneficiary of an IRA. In this scenario, The IRS will “see through” the trust and treat the trust’s beneficiaries as if they were the IRA’s direct beneficiaries. The beneficiaries’ life expectancies will then be used to determine the IRA’s required minimum distributions. Additionally, a see-through provision allows these distributions to be taxed at the individual beneficiary’s tax rate rather than at the trust’s tax rate.
Oftentimes, a trust’s tax rate is higher than an individual’s. Therefore, a see-through provision could help prevent a large tax bill when the owner of the IRA dies, depending on the individual beneficiary’s tax situation.
A blank or incomplete Schedule.
Schedules are attachments to the trust document that contain important details concerning the trust (most commonly a Schedule A). For example, most trusts have a schedule that is the inventory sheet of the trust, and it typically details what assets you have transferred into the trust. As such, it’s important to make sure all schedules are complete and accurate — it shouldn’t be blank! It is important to confirm with your attorney that your trust actually owns the assets you intend for it to own.
If it’s not clear what assets the trust owns on the statement, you should be concerned and meet with an attorney who can review your trust to help ensure your wishes are accurately reflected.
POD/TOD.
POD means “payable on death.” TOD stands for “transfer on death.” These designations allow the beneficiary to receive assets without going through probate. Does every bank account, including all your checking, money market, savings and CD accounts, have POD and TOD instructions on them? Probate can be an expensive process. Laws governing attorney fees for probate are decided by individual states and can vary. For example, consider a savings account with $200,000. In Florida, attorney fees to probate this account could be as high as 3%, or $6,000. Having a POD or TOD on this account could help save on these administrative expenses.
Having too many accounts.
The FDIC places a limit of $250,000 per depositor, per bank on the amount that it will insure. As such, you may consider consolidating some of your bank accounts if you have more than you actually need to ensure you are protected. Otherwise, you might overcomplicate your estate.
Leaving no inventory of assets.
So where is everything? Even if you have been meticulous about having all the right documents, it does no one any good if they can’t find them after you die. So leave your loved ones a checklist to tell them where they can find your birth certificate, Social Security card, marriage license, pre-nuptial agreement, military records, will, burial instructions, cemetery plot deed or cremation agreement, bank and credit documents, mortgage papers, personal financial documents, and safe deposit box and keys.
Your legacy is the last impression you leave behind. The last thing families want to do is leave their children or beneficiaries 1,000 puzzle pieces scattered all over the floor. A legacy is not a 1,000-piece puzzle scattered to the wind but a picture worthy to be framed.
Rozel Swain contributed to this article.
Investment advisory services offered through AE Wealth Management LLC, (AEWM). AEWM and SWAN Capital are not affiliated entities. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions. AW04172438
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Andrew McNair is the president, Investment Adviser Representative and Insurance Professional of SWAN Capital, which he founded in 2012. In the same year, he established the Veteran Benefit Project, an organization that helps veterans qualify for VA benefits. He specializes in the fields of retirement income, long-term-care, wealth preservation and has a strategic partnership with an attorney for estate planning services. He has helped inform thousands of individuals about planning for retirement.
-
5 Historic Philadelphia Homes for Sale Now
Philadelphia is a goldmine of historic properties that rival the best in New York, London and Paris for charm and opulence. Here are five gems you can own.
By Charlotte Gorbold
-
When to Sell Your Stock
Knowing when to sell a stock is a major decision investors must make. While there's no one correct answer, we look at some best practices here.
By Charles Lewis Sizemore, CFA
-
Within Five Years of Retirement? Five Things to Do Now
If you're retiring in the next five years, your to-do list should contain some financial planning and, according to current retirees, a few life goals, too.
By Evan T. Beach, CFP®, AWMA®
-
The Home Stretch: Seven Essential Steps for Pre-Retirees
The decade before retirement is the home stretch in the race to quit work — but there are crucial financial decisions to make before you reach the finish line.
By Mike Dullaghan, AIF®
-
Three Options for Retirees With Concentrated Stock Positions
If a significant chunk of your portfolio is tied up in a single stock, you'll need to make sure it won't disrupt your retirement and legacy goals. Here's how.
By Evan T. Beach, CFP®, AWMA®
-
Four Reasons It May Be Time to Shop for New Insurance
You may be unhappy with your insurance for any number of reasons, so once you've decided to shop, what is appropriate (or inappropriate) timing?
By Karl Susman, CPCU, LUTCF, CIC, CSFP, CFS, CPIA, AAI-M, PLCS
-
Before You Invest Like a Politician, Consider This Dilemma
As apps that track congressional stock trading become more popular, investors need to take into consideration some caveats.
By Ryan K. Snover, Investment Adviser Representative
-
How to Put Together Your Personal Net Worth Statement
Now that tax season is over for most of us, it's the perfect time to organize your assets and liabilities to assess your financial wellness.
By Denise McClain, JD, CPA
-
Bouncing Back: New Tunes for Millennials Trying to Make It
Adele's mournful melodies kick off this generation's financial playlist, but with the right plan, Millennials can finish strong.
By Alvina Lo
-
Early-Stage Startup Deals: How Do Convertible Notes Work?
Some angel investors support early startups by providing a loan in exchange for a convertible note, which includes annual interest and a maturity date.
By Murat Abdrakhmanov