6 Biggest Missteps People With Wills Take, According to Experts
Most people know they should have a will. Far fewer realize how many ways a will -- or the lack of one -- can go wrong.
Two estate planning experts broke down the mistakes they see most often and what families can do to avoid them.
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1. Not Having One at All
Salvatore Milazzo, senior vice president, regional trust and investment manager at Farmers and Merchants Trust Company, said this is the most common and most consequential mistake of all.
"It's usually not until someone passes without one that families realize how important it really is," Milazzo said. When no will exists, the state steps in and distributes assets according to its own formula, which rarely reflects what the person actually wanted. The resulting confusion, conflict and court involvement can cost families far more than the will itself ever would have.
2. Never Updating It
Both experts flagged this one independently, which signals how widespread the problem is. A will drafted ten years ago may name an ex-spouse as a beneficiary, omit grandchildren who were born since or fail to account for a move to a different state with different laws.
Tax and trusts and estates attorney Asher Rubinstein, a partner with Gallet Dreyer & Berkey, painted a clear picture of what can go wrong: If someone goes through a divorce but never removes the ex from the will, that former spouse remains a legal beneficiary -- setting up a near-certain court battle between the ex and other intended heirs.
Milazzo recommended reviewing a will at least once a year and after any major life event: Marriage, divorce, the birth of a grandchild or a cross-state move.
3. Assuming the Will Covers Everything
It doesn't. Retirement accounts, life insurance policies and jointly held property all pass according to beneficiary designations -- not whatever the will says. Rubinstein pointed out that if you update your will after a divorce to exclude a former spouse but forget to update the beneficiary designations on bank accounts, retirement accounts and insurance policies, those assets go to the ex regardless.
Milazzo said keeping beneficiary designations aligned with the will is just as important as the document itself. The two have to work together to reflect the actual plan.
4. Assuming Beneficiaries Will Get Along
Rubinstein called this one of the most underestimated mistakes in estate planning. Shared ownership of a vacation home, an income-producing asset or a business can force beneficiaries into an ongoing relationship they may not want and can't easily exit.
Being related doesn't mean people should be in business together, he said. At minimum, a will that creates shared ownership should include a clear mechanism for resolving disputes and a fair way for any beneficiary to exit the asset if they choose.
5. Using Fixed Dollar Amounts Instead of Percentages
Specific monetary bequests -- leaving a set dollar amount to a particular person -- can create serious problems if the estate doesn't have enough liquidity to cover them. Rubinstein said an executor may be forced to sell assets to fulfill specific bequests, and if the total of those bequests exceeds the estate's actual value, other intended beneficiaries receive nothing.
Leaving a percentage of the estate rather than a fixed dollar amount avoids this problem entirely and keeps the distribution proportional regardless of what the estate is ultimately worth.
6. Overlooking Asset Protection and Tax Planning
Rubinstein said wills should include spendthrift clauses -- provisions that give the executor authority to limit or stop distributions to a beneficiary who poses a risk to themselves or to the estate's assets, such as someone with a substance abuse or gambling problem. Without these clauses, there is no mechanism to protect an inheritance from being depleted.
On the tax side, he noted that while federal estate taxes currently exempt estates valued under $15 million, state-level taxes vary significantly. New York, for example, imposes what he called a fiscal cliff: Estates that exceed a certain threshold lose the exemption entirely and the full estate is taxed from the first dollar. Proper planning with an attorney can help executors and trustees avoid crossing that threshold unnecessarily.
Both experts also emphasized that a will alone is often not enough. Assets that pass through a will still go through probate, which Rubinstein described as a time-consuming, costly and public court process. Pairing a will with a revocable living trust allows assets to pass directly to beneficiaries without probate, saving time, money and the exposure of a family's financial details to public record.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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