The estate planning traps your attorney didn't tell you (+ how to fix them)
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Most rich families think signing their estate documents means the job is done.
Spoiler alert: it doesn’t.
This is just one of the most common estate planning mistakes wealthy families make.
And your attorney isn’t going to warn you about ANY of them.
In this episode, I’m telling you how to avoid the estate planning traps that are going to cost your heirs.
We’re breaking down the pitfalls rich people constantly fall into, including:
Overly complicated documents
Unfunded trusts
The set-it-and-forget-it disaster
So you don’t make the same mistakes.
Read on to learn how to make your estate plan foolproof.
🗓️ Schedule a FREE call to talk more about how I can help you navigate a current or future inheritance.
Transcript:
Hey, I'm Katherine and thanks for joining me at Heir Necessities, the podcast that turns complex financial topics into real talk for Gen X, Millennial, and Gen Z inheritors.
Each episode of this podcast, I'm breaking down a different topic related to generational wealth and inheritance. My goal is that you can stop trying to figure out how to manage your money by asking Google or ChatGPT what to do and come here instead for real talk, real solutions, and real advice that you can start implementing in your life today.
What Are the Biggest Estate Planning Mistakes Rich Families Make?
In this week's episode of Heir Necessities, I am diving into the three biggest mistakes that rich families make as part of their estate plan.
These are the mistakes that I have seen in real life over and over and over and they're the mistakes that your attorney probably isn't gonna be telling you about.
Before I dive into it, a quick plug. If you are enjoying Heir Necessities, I would be so appreciative if you could take five seconds and leave the podcast a review wherever you listen to your podcasts.
Apple, Spotify, wherever. It is hugely helpful for the show and it helps me connect with and support more inheritors just like you.
Why Do Estate Planning Mistakes Keep Happening?
Now let's dive into these estate planning mistakes. These are actually really common sense things.
Nothing that I'm going to be talking about in this episode should be a shocker. We're talking about low-hanging fruit.
But the problem is that most attorneys are not guides and executors. They are document drafters.
They're going to create your documents and they're going to tell you what to do and they're going to leave you off on your own to do it. And what that means is that when you have the framework without execution support, mistakes get made.
I'm going to be walking you through the three biggest mistakes that I have seen friends, clients, prospective clients make as part of their estate plan, teaching you how you can avoid them so you don't get caught in these same traps.
How Complicated Does an Estate Plan Really Need to Be?
The first and biggest mistake that I see wealthy families make as part of their estate plan is that they make documents that are way too complicated. Yes, there are legitimate reasons for many families to have more complicated estate plans, but broad strokes in 2026, the federal estate tax exemption is $30 million, which means that if you have an estate that's 30, 35, maybe even 40 million, you do not need to be doing really any complex estate planning.
Because that federal estate tax exemption is so high at that asset level and certainly below 30 million, you can get away with a pretty vanilla set of legal documents.
Just because you have a lot of money, it doesn't necessarily mean that you need a lot of complexity.
What Is the Competency Trap in Estate Planning?
But that's not necessarily what you're going to hear from every attorney you talk to. And here is where a lot of families fall into what I would call the competency trap with the professionals that they work with.
It's a very ego-driven thing, not on the part of the family, but on the part of the attorney, the financial advisor, whoever it is they're working with, and that person wants to show off how smart they are and their technical expertise and their chops.
And they do that by throwing out a whole bunch of complicated solutions, making you feel like if you don't understand or if you don't use these solutions, then you're doing something wrong.
If you feel like you're being pushed into vehicles you don't understand, estate planning terminology that is too confusing for you, stop, take a breath, really ask yourself if someone has appropriately explained to you if this level of complexity is fully necessary.
When Does Estate Planning Complexity Actually Make Sense?
There are some situations where building in additional complexity with estates that are 30 million and under makes sense. One is for any state that has an estate or an inheritance tax.
For those states, right, it can make sense to build in more trust planning to preserve those estate exemptions. But in the same vein, a lot of that state estate tax planning, depending on the state and the rules, can be done in that kind of deathbed planning or in the last years of your life, as opposed to building in a lot of complexity in estate documents.
So if you are either looking to revise your estate plan or getting an estate plan done for the first time, I want you to remember that simple does not mean bad.
Things do not have to be complex to be good. And in fact, if you have an estate plan that is simple, that it's easy for you to understand and easy for you to explain to your heirs, there's a good chance that that is the best estate plan for you.
Why Do Most People Fail to Fund Their Trust After Signing?
Because even in a simple estate plan, there's still a fair amount that needs to be done.
Which leads me to the second biggest mistake that wealthy families make with their estate plan. It usually goes like this.
You go to your attorney, you get your documents drafted, you sign those documents, your attorney gives you the big stack of papers, and on top of that big stack of papers is a letter of direction. And that letter of direction usually says something like, this is how you retitle your house into the trust, this is how your investment accounts need to be renamed, this is how you should update your beneficiary designations, etc.
And what do most people do with that big stack of documents, including that extremely important letter at the top? They throw it in a file, think, well, glad I did that, and then move on with their lives.
What Happens If You Don't Title Assets Into Your Trust?
But the problem, especially if you have created a trust-based estate plan, which in many states is going to be the default that an attorney provides, is that if you don't then title your assets in the name of that trust, you have spent thousands of dollars to build a very expensive box that has literally nothing in it.
In order to get the benefits of a trust-based estate plan, you need to actually put your assets into that trust.
And that means retitling your house in the name of the trust, retitling your investment accounts in the name of the trust. Retitling your other major assets if you have collectibles, cars, whatever, in the name of the trust.
And then updating all of your accounts with beneficiary designations, your IRA accounts, etc., so that they flow either into the trust, if that's what your attorney has recommended, or that they flow out directly to your beneficiaries as they should.
What Goes Wrong When a Trust Is Never Funded?
I actually cannot tell you the number of times that I have seen this mistake in practice. Documents have been drafted.
Someone dies, you look at the documents, you see the trust, you say, did anything ever get put in this trust? The answer is no.
And now you've lost the benefit that you were looking for with that trust. That benefit might have been probate avoidance, it might have been a spousal trust for state estate tax planning.
Why Do You Need More Than an Attorney for Estate Planning?
Whatever the reason is, if you have created a trust-based estate plan, your responsibilities don't end after your documents are signed.
And that's why it can be so important to have someone else like a financial planner that you trust who's going through this estate planning journey with you. Because yes, your attorney is a subject matter expert, but they are not the person who's going to be holding your hand to actually make sure all of this stuff gets done once your documents are drafted and signed.
Why Is Estate Planning Not a One-and-Done Process?
And this leads me to the third biggest mistake that wealthy families make in their estate plans. They take that big stack of documents, that letter on the top, maybe they've actually dealt with it, right?
They did everything the letter said, they retitled their assets, they take that whole stack of documents, they shove it in the drawer and they think I'm done. And then they literally never think about it again for 10, 20, 30 years.
Which means maybe at that point you have a child who's 35 instead of five years old, and you put all these provisions in the trust, all of these guardrails up because when you were writing documents, you were writing for a five-year-old, not someone who's 35.
And so it's really, really important to understand that estate planning is not a one and done kind of a situation.
How Often Should You Update Your Estate Plan?
It's really something that needs to be revisited every five to 10 years, not only to review the people that you're leaving money to, how you're leaving money to them, and how that should change as your heirs get older, as you decide you want to give to different organizations if you don't have children and are thinking about charities as your ultimate heirs, but also because there are tax and estate changes that are happening at the state and federal level all the time.
And we've seen it over the past six years, the amount of times that that federal estate tax exemption has changed, it kind of whipsawed around.
If you aren't revisiting your documents with the aim of updating them in response to those changes, you could end up in a situation where you die, you have all these documents, but they've just created unnecessary headaches for your heirs.
Why Is Estate Planning Really About People, Not Just Taxes?
That really sums up the point that I'm trying to make in this episode is estate planning is something that is scary.
No one likes to talk about their death. And also something where there are so many opportunities in the process for something to go wrong.
And that's especially true if you don't have someone who is holding your hand and guiding you through that process, which is the role that I take on working with my clients at Sunnybranch.
I understand that estate planning is a difficult thing, but the goal of it should be to make life as easy as possible for your heirs.
What Do Attorneys Often Miss About Estate Planning?
I know that that's not always the goal that attorneys have. Oftentimes their goal fully is going to be tax avoidance.
And I understand that and I think it's important. I'm not saying that you should pay more taxes than you have to, but I think in that goal of being smart and outsmarting the IRS and paying as little taxes as possible.
The thing that often gets lost is estate planning is about people. It's about your wishes and it's about how you want life to look for your heirs.
And getting tripped up in any of the mistakes that I've talked about today is going to make things worse for your heirs. You might not be around to see it, but trust me, I am.
How Can You Get Help With Your Estate Planning Mistakes?
And I see the many different ways that this can go wrong after someone dies.
So if you're worried that either you're already making one of these mistakes or you're about to start the estate planning process and you want to be sure that you get everything right, I would love to chat.
You can email me katherine@sunnybranchwealth.com, hit me up on Instagram @sunnybranchwealth, or if you just want to keep learning and aren't ready to chat in real time yet, I'll catch you on next week's episode of Heir Necessities.
Let’s take the next step together
Understanding how to protect, invest, grow, and/or give away a multi-million dollar inheritance isn’t easy. Inheritors can encounter a wide variety of different situations requiring knowledge and finesse to manage. If you need more help, reach out to Katherine Fox, CFP® and CAP®, financial planner for inheritors, to learn how Sunnybranch can help you evaluate your financial situation and build a plan for your financial future.
