Estate Planning Blog

Avoid These Common Estate Planning Mistakes in California

Estate planning is important for everyone regardless of age, financial status, or family composition. It involves determining how your assets will be distributed after you pass away, as well as providing instructions for your medical care and financial affairs if you become incapacitated. However, even with the best intentions, people often make mistakes when it comes to their estate planning, which can lead to unintended consequences and financial strain on their loved ones.

In this article, we will discuss some of the common estate planning mistakes that Californians should avoid. Whether it’s failing to update their estate plan or neglecting to consider potential tax implications, these mistakes can have serious consequences. By being aware of these pitfalls, you can work to ensure that your assets, loved ones, and wishes are protected in the event of your incapacity or death.

Taking the Risk of Delaying Estate Planning

One common estate planning mistake made by individuals in California is delaying the process altogether. Many people assume that estate planning is only necessary for the elderly or those who are wealthy. However, estate planning is essential for any adult regardless of age or financial status. Delaying estate planning can lead to unexpected consequences, such as assets being distributed according to California law and the estate being subject to probate, which can be a lengthy and costly process. To avoid these potential pitfalls, individuals should seek guidance from a qualified estate planning attorney and begin the process as soon as possible.

Failing to Plan for Disability and Long-term Care

One common estate planning mistake in California is failing to plan for disability and long-term care. Many people overlook the possibility of becoming incapacitated due to an accident, illness, or age-related decline. Without proper planning, their financial and medical decisions may be left in the hands of strangers or the court system. Additionally, long-term care can be costly, and failing to plan for it can quickly deplete one’s assets. There are various tools available for Californians to plan for disability and long-term care, such as advanced healthcare directives, powers of attorney, and long-term care insurance. It’s important to work with an experienced estate planning attorney to create a comprehensive plan that addresses these potential scenarios.

Failing to Update Wills and Forms That  Lead to Estate Planning Disasters

Failing to update wills and forms is a common estate planning mistake in California that can lead to estate planning disasters. Over time, changes in personal circumstances, family dynamics, and tax laws can render existing estate plans obsolete or ineffective. Failing to update wills, trusts, and beneficiary designations can result in unintended consequences, such as assets passing to the wrong individuals or being subject to unnecessary taxes and fees. 

It’s crucial to regularly review and update estate planning documents to ensure they reflect current wishes and circumstances. This includes reviewing beneficiary designations on retirement accounts and life insurance policies, which can override the provisions in a will or trust. Estate planning should be a dynamic process, and Californians should consult with an experienced estate planning attorney to ensure their plans remain up-to-date and effective.

Neglecting to Name Contingent Beneficiaries

Another common estate planning mistake made in California is failing to name contingent beneficiaries. A contingent beneficiary is a backup beneficiary who inherits an individual’s assets if the primary beneficiary is deceased or unable to inherit the assets. Neglecting to name contingent beneficiaries can create confusion and conflict among family members, and assets may be distributed in a way that is not in line with an individual’s wishes. To avoid this mistake, individuals should consider naming at least one contingent beneficiary. This ensures that their assets will be distributed according to their wishes, even if their primary beneficiary is unable to inherit them.

Absence of a Trust’s Title

One common estate planning mistake in California is the absence of a trust’s title. A trust is an effective tool for avoiding probate, protecting assets, and ensuring a smooth transfer of wealth to future generations. However, it’s essential to properly title assets in the name of the trust to realize these benefits fully. Failing to retitle assets, such as real estate or bank accounts, in the name of the trust can result in these assets being subject to probate or legal challenges. Additionally, assets titled in the name of the decedent can be subject to estate taxes, which can be avoided by proper trust funding. It’s crucial to work with an experienced estate planning attorney to ensure that all assets are properly titled in the name of the trust, maximizing the benefits of this powerful estate planning tool.

Allowing Your Life Insurance to Set Off Estate Tax 

Allowing your life insurance to set off estate tax is a common estate planning mistake in California. Life insurance proceeds are generally not subject to income tax, but they can be subject to estate tax if the policy is owned by the deceased at the time of death. This can reduce the amount of wealth transferred to beneficiaries and potentially cause financial hardship. One way to avoid this issue is to transfer ownership of the life insurance policy to an irrevocable life insurance trust (ILIT), removing it from the taxable estate. An experienced estate planning attorney can assist with establishing an ILIT and other strategies to minimize estate tax liabilities and maximize the transfer of wealth to loved ones.

Failing to Know the Consequences of Making Your Children Joint Owners of Your Assets

Making your children joint owners of your assets can be a common and well-intentioned estate planning strategy. However, it can also have significant unintended consequences. For example, adding a child’s name to a home or bank account can affect an individual’s ability to sell or refinance the property. Additionally, if the child is sued or goes through a divorce, the individual’s assets may be at risk. Furthermore, if the child predeceases the individual, the assets may pass to the child’s heirs, creating unintended consequences for the estate plan. To avoid these problems, individuals should consult with an estate planning attorney to explore other strategies, such as gifting or creating a trust.

Failure to Plan for Estate Tax Liability

Failure to plan for estate tax liability is a common estate planning mistake in California. An estate tax is a tax on the transfer of property at death, and it can significantly reduce the amount of wealth passed on to loved ones. Many people underestimate their estate’s value and fail to take advantage of available strategies to minimize estate tax liability. These strategies include gifting, creating trusts, and leveraging exemptions and deductions. It’s important to work with an experienced estate planning attorney to develop a comprehensive plan that takes into account the current tax laws and your unique circumstances. Proper planning can help maximize the amount of wealth transferred to loved ones and minimize the impact of estate taxes.

Leaving Out Charitable Gifting and Bequests

Leaving out charitable gifting and bequests can be a common estate planning mistake in California. Charitable gifting and bequests involve leaving assets to a charitable organization, which can provide individuals with significant tax benefits. However, individuals may overlook this option when structuring their estate plans. Charitable gifting can be structured in various ways, such as leaving a specific amount or a percentage of the estate to a charitable organization, creating a charitable trust, or naming a charitable organization as the beneficiary of a retirement account. Consulting with an estate planning attorney can help individuals explore these options and ensure that philanthropic goals are achieved while providing tax benefits.

Not Seeking Professional Help

Not seeking professional help can be a significant mistake made during estate planning in California. While there are online resources available, many individuals do not fully understand the complexities of estate planning and may miss important details that can lead to unintended consequences. An estate planning attorney can guide strategies to reduce taxes, protect assets, and ensure that an individual’s wishes are carried out. They can also assist with updating estate plans as circumstances change, such as the birth of a child or a change in marital status. Seeking professional help can help individuals avoid costly mistakes and provide peace of mind that their estate plan will be carried out as intended.

Our Final Thoughts On Common Estate Planning Mistakes In California

In conclusion, estate planning is a critical step in protecting your assets and ensuring that your loved ones are taken care of when you pass away. While it can be uncomfortable to contemplate one’s mortality, avoiding common estate planning mistakes can make a significant difference in the distribution of your assets and reduce stress and conflict for your loved ones. By seeking professional help, updating your plan regularly, using trusts, planning for incapacity, coordinating your plan with your spouse, and naming beneficiaries correctly, you can achieve peace of mind, protect your legacy, and leave a lasting impact on those you care about. Don’t wait until it’s too late, start your estate planning today.

Are You Worried About Your Estate Plan or Trust?

Are you worried about the potential minefield of setting up a trust and estate plan all by yourself? Don’t worry, you’re not alone. Luckily, we’re here to help you navigate the ins and outs of estate planning in California.

With over 30 years of experience, Joel A. Harris has been protecting the estates of families throughout California. Whether you’re starting from scratch or need to update your current plan, we’ve got you covered.

Don’t leave the future of your estate to chance. Let us guide you through the process of setting up a trust and estate plan that will protect your assets and ensure a lasting legacy. Visit us online, in person, or give us a call at (925) 757-4605 to learn more about how we can help you with your estate planning needs in California.


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