Estate planning is an essential part of securing your financial future, and it involves creating a comprehensive strategy for how your assets will be distributed after your passing. Since life is constantly changing, it’s vital to review and update your estate plan regularly to ensure it still aligns with your goals. To help you navigate this process, here are seven common estate planning mistakes you should avoid:

1. Not Fully Using Your Estate Tax Exemption

In 2025, the federal estate tax exemption allows individuals to transfer up to $13.99 million tax-free, and married couples can transfer up to $27.98 million. However, this exemption is set to decrease starting in 2026, reverting to pre-2018 levels. To maximize your estate’s value before the exemption shrinks, consider working with your estate planner to establish trusts, make gifts, or employ other strategies that take full advantage of the current limits.

2. Failing to Set Up a Lifetime Trust

Not all trusts provide the same level of protection, and it’s crucial to understand the nuances. While some trusts may offer protection against creditors, others may expose your assets to risk if distributions are made inappropriately. Irrevocable lifetime trusts can be a great way to shield wealth for future generations, offering protection from creditors, ensuring assets aren’t wasted, and controlling how beneficiaries use their inheritance. This type of trust is particularly useful for high-net-worth individuals concerned about asset protection and wealth preservation.

3. Neglecting the GST Exemption and Other Tools

One way to minimize estate taxes is by setting up a generation-skipping trust (GST), which allows you to transfer assets directly to your grandchildren without incurring additional taxes. However, the GST exemption, like the estate tax exemption, is set to expire in 2026, so it’s essential to act before then to maximize its benefits. Other strategies like creating a family bank or establishing a private trust company can help build a lasting legacy while offering flexibility for future generations.

4. Lack of Flexibility in Trusts for Wealth Transfer

When creating trusts, it’s important to ensure they are adaptable to changing laws, circumstances, and family dynamics. Trusts should allow for adjustments like moving a trust between states, splitting or combining trusts, or replacing trustees. Additionally, consider adding a trust protector—someone with the authority to make changes to the trust without being the trustee. This flexibility will help ensure your plan remains relevant as your situation evolves.

5. Ignoring Proper Ownership Structures

The way assets are owned can have a significant impact on your estate plan. Whether assets are held in sole ownership, joint ownership, or tenants in common can affect estate taxes, asset protection, and administration. By choosing the right ownership structure, you can reduce the overall value of your estate, control your investments more effectively, and simplify the management of your assets.

6. Choosing the Wrong State for Your Trust

Where you establish your trust matters, as the location determines which state laws will govern it. States like Alaska, Delaware, Florida, and Nevada are known for their favorable trust laws, offering flexibility, strong asset protection, and tax advantages. Consider these factors when selecting the state for your trust, as they can make a significant difference in its effectiveness and the long-term protection of your assets.

7. Selecting the Wrong Trustee

Choosing the right trustee is critical, as this person or entity will be responsible for managing and distributing your assets according to your wishes. While many opt for family members, the role of trustee requires time, expertise, and impartiality—qualities that may be difficult for relatives to provide. In many cases, a corporate trustee is a better option. Corporate trustees are regulated, insured, and impartial, which can help minimize family conflicts and ensure the trust is administered professionally.

Conclusion

Estate planning is a vital component of ensuring that your wealth is distributed according to your wishes and that your legacy is protected for future generations. By avoiding these common mistakes and working with a knowledgeable advisor, you can create a plan that maximizes your estate’s value, minimizes tax liability, and provides peace of mind for your family.