5 Estate Planning Mistakes That Leave Families Trapped

Phil, today we're talking about five common estate planning mistakes. And I know that you see these five over and over. You've been at this a long time. So, I'm sure that none of these are new to you. And I'm guessing that most people who are watching have made at least one. I've certainly been exposed to these mistakes in my time here. So, Phil, why do these five mistakes matter?

Well, I think first, Spell, everybody believes that estate planning is only for the wealthy. People, unfortunately, they mistakenly believe that unless you have lots and lots of wealth, estate planning isn't for me. That misnomer has caused a lot of problems. People ignore or forego any estate planning because they think they don't need it. The fact of the matter is really anyone. If you're an adult, you have anything, particularly if you have kids. But really just anything, you need some basic legal documents. So that your wishes are carried out. Whether that's for wealth, whether that's do not resuscitate. Whether that is HIPAA issues or provisions. You need basic documents in place. Spell, I think so many people, they ignore it because they don't think they qualify, just don't have enough money.

Okay. All right. Fair enough. Which of the five keeps you up at night the most? And you just had an experience recently that I think will maybe you're going to shed some light or shine some light on that story. It dealt with hospice.

Well, the one that keeps me up the most to answer, I think that was a question. The one that keeps me up the most is just running into people that just don't have anything done. They just have nothing. That bothers me a lot because I know what the consequences are when you don't. I've seen it. I've watched that. It's literally a rerun for me. And like you said, after 34 years, I've seen a lot of it. But Spell, you've been here almost five years. Didn't take you a year to see it. Right. In your first several months, your first meetings, I bet you saw it. People just don't do it.

Yeah, it's true. It's true.

As far as keeping me up at night, not having the documents, but then you mentioned a hospice case recently. So, yes, a longtime client ended up in hospice. And you know what? A little bit of a tragedy because the family really felt they had everything buttoned up. And for the most part, they did. And they're simple. They're simple people. Most families don't want to get into really complex stuff. Regardless of what we recommend, regardless of what we bring to the table, regardless of what the estate planning attorneys bring to the table, sometimes they just really want to keep it simple. And Spell, most people never believe that the unbelievable can happen. But it can. And in that case, it did.

Hold on to that because that's going to be our number five. Oh, that's going to be our number five. And you've actually already, you're jumping ahead of me, which is perfectly fine. But you already mentioned your number one, and that is the number one mistake is just not having any documents. So, and it happens, so prevalent, so common. It's common. I cannot feel, and this is an aside really, but this year, so 2026, I have met with lots of new relationships, which has been wonderful, and so many of them, and this is not a dig or a slight towards anybody, but so many of them have not done any estate planning. None. And there's multi-million dollar portfolios, there's children, there's real assets. You name it, it's there. And there's no estate planning documents in place.

Well, don't forget, Spell. People don't want to talk about finality.

True.

People don't want to talk about death. That is just something that most people, they shy away from that. They just want to duck the issue and I get it. No one wants to talk about that. Who wants to sit around and talk about morbidity? Right. No one wants to. But the reality is none of us, and I hate to be the one to say it, but we all know it. None of us are going to outrun that, right? It's going to happen to all of us. If there is one thing guaranteed, it is, people say it's death and taxes. Well, taxes aren't guaranteed.

It's true, right?

Because it's possible that if you set things up the right way, you don't have to pay any, right? But death is guaranteed.

It is.

And so the fact that people just ignore it thinking it won't happen. It's unfortunate because they can leave the folks that survive them in a really bad position. That keeps me up at night because I know what that can look like. I've seen it with clients over the years and in the last couple years we've seen a lot of clients pass away. And so we know exactly how important that is.

To your point, this year I've seen, our professional advisory board, one of the attorneys, I've seen him in and out of here a lot. A lot this year. I've seen him in here three times this week or two times this week working on new plans. For newer clients. So it's true. You're right. It's a big deal and I think it gets missed a lot. So the first major mistake is having no documents at all. The second, the number two mistake, and we hear this all the time. I picked my executor in 2011. Does that choice expire?

Well, it doesn't necessarily expire, but there's a pretty good chance that you should put an expiration date on it depending on the situation. It doesn't have to expire. That person might live longer than you and that person might be there. But inside of every legal document there is an out for that executor. I think is the way you just described as the executor, not a trustee, but one and the same, right? So if it's a trust, it's a trustee; will, it's an executor. They can opt out. So I think first you need to have that conversation with them. They need to understand that you've listed them in the will. One of the things that drives me nuts, Spell, is when someone does their legal planning and they list a person to be their executor and they never tell them.

Oh my god.

And when you ask them, I always ask the question, did you have a conversation with this person now that you're going to name them? When the estate planning attorney is drafting the documents, I'll ask, did you talk to them? No, but I know they'll do it. We mentioned it one time and they told me, "Yeah, they'd be happy to do it." You need to have that conversation.

Yeah, for sure.

That's important because that person may change their mind once they research a little bit, once they know their name is listed in a legal document and they know when something happens they are going to be called on to perform this duty. This duty can be very challenging.

Yes, it can.

I was on the phone today with an executor and trustee, simultaneous work. I was on the phone with them. They were sitting at a bank trying to get an account that was opened incorrectly for the estate. They used a social security number of the deceased. Can't do that. Needs to be an EIN number. And they had know it. And we've been working to help them undo that. Got it done.

Nice.

But I was on the phone with them and their bank trying to get this fixed. We did, but they had no idea. And so one of the things that I heard from them loud and clear on the call today and a previous call is, I'm not sure why I signed up for this. What that tells you is there can be real challenges there. You can run into a lot of stuff and find yourself in a morass and there's nothing you can do about it except you can opt out. So naming the right person doesn't have to come with an expiration date, but it might. They can die. That person can prematurely pass. Right. They can free to cease.

Yeah, you're exactly right. It's a multivariable equation. When you're dealing with people, they can lose their faculties, right? They could all of a sudden become incapacitated.

Exactly. All kinds of things. People are volatile just like the markets. People are volatile. They get sick. They move. They might go across the country. They might go out of the country. There's so many things.

You know, the simplest one?

What's that?

They might just not like you anymore. They might just stop liking you.

That's true, too.

Do you remember how many friendships were lost during COVID because people didn't have the same belief?

That's a great point.

Right. I saw friendships go away.

It's true.

So that can happen.

Yeah, for sure.

And so you've got to know that that is a real risk. And then you got to be willing to change those things if that person's in there. So yeah, it's not as simple as set it and forget it. Getting the wrong person, you're giving someone the ability to do a lot of things for you.

True.

And they are supposed to do it based on the way you would do it and what you've written. In a trust sometimes there's even more freedom. Sometimes people will write a trust that says my trustee has full discretion, do whatever they want. Well, your trustee can sometimes be a little more lax about things than you might be. Right? In other words, they might not control things the way that you really intended. And when you give them full discretion, maybe you didn't want your child to get enough money to go buy that Porsche 911. But that trustee might say, "Oh, little Junior deserves it. Lost his parents. Just lost his parents. Go buy a nice car. Do it." And so you have to really be careful and you need to set the rules so that everybody understands what you're expecting from them.

Yeah. It's important. Here's number three. My kids get the money at 25, 30, and 35. And that sounded responsible, but what is wrong with that?

It sounds responsible. And in a lot of cases, it is. But there's a lot that could be wrong with that. You have to think beyond a simple age. 25, 30, 35. It's really common to do a schedule like that or to grade it that or be graded. So, they hit 25, they hit 30, they hit 35. What a lot of people don't think about, and attorneys don't always want to bring this up. Sometimes it can create a lot of emotions and so they just tend to go basic. But there needs to be triggers built into that. So what if they're 25 and you think they're so responsible? Well, if you've got a multi-million dollar estate and at 25 they get half of it or 25% or whatever it is, that responsible young person, let's be real, at 25, maturity is still occurring.

For sure. I agree.

With a young man, it has a long way to go. With a young woman, at least their maturity level, we believe, is generally going to be a little further down the road. So, you might feel a little bit better about that, giving them something. But regardless, male, female, at 25, levels of maturity need to be developed and to all of a sudden be handed lots and lots of money potentially. In some cases, certainly with the people we work with, it could be millions of dollars. I believe that you can create a really nasty outcome.

I think you're right.

When they forego triggers, when they forget to put those in. So 25 I think is too young without triggers. So, I believe there needs to be something in that document that says be sure that they're on the right path. Did they finish school? Are they employed? Are they a good member of society? And there's all kinds of things. I could go through dozens of triggers that we've put in these documents with our attorneys. That part's important.

Yeah, for sure.

30. People say, "Well, by the time they're 30, they're definitely going to be okay." And then 35, oh shoot, if they're not ready by then, they never will be. Well, that's not true. There's so many things that 25, 30, 35 year olds go through just trying to find their way. It's different from 20, 30 years ago when it was just understood that you'd go to work, right, and you had to get out and do it. Today, I don't want this to come off the wrong way, but today, Spell, we're raising people differently. They're softer. They're not responsible the way they once were. And parents are coddling more and more and more. We see it all the time.

For sure.

And I'm not casting aspersion or I'm not saying that that's just all bad. I'm saying it becomes much more noticeable when all of a sudden they inherit millions of dollars. If they're not, they can really turn out the wrong way. Well, not the intended way.

It puts somebody under the magnifying glass. Really, it does. And what you just said a second ago couldn't be more true. You said that somebody may say if they're not ready by 35, they never will be. Write your trust that way.

If they're not ready by 35, then you ought to make some changes to that trust or change what you're thinking about putting into effect.

Great point. Great point. If that's really what you believe, then say, you know what, if they're never going to be any better, then maybe we need to put limiters on that, for sure. Maybe there simply needs to be a way for them to get income, right? And then principal for certain things.

No doubt. Right. No doubt.

But not just give them the box of money to say, "Well, by then they'll be better." Or they're never going to get any better. And hey, I'm gone, so it won't matter. Yet it matters.

Well, it matters. It definitely matters. And you talk about it a lot with our clients because we'll sit in on estate planning meetings with our clients. Attorneys at the table, clients are at the table, and we're at the table. We talk about these things all the time because to your point and fortunately not necessarily in the meetings that we're a part of, but people will bring us legal documents and we'll review them and we'll think did your attorney talk to you about anything because let's take the example pours out at 25, 30, and 35 respectively and everything goes at 35. What are the risks once it empties? There's a lot of them. What are the risks?

Huge risks. Well, for one, you've got someone who may not know how to handle money for sure. 35 years old. I see a lot of those people. And so to all of a sudden get the remainder of a trust, whatever that is, and if it's millions of dollars, these people are now in control of something that allows them to make some really bad decisions. Now, some of them might make really good decisions. But there is a big part of our society who is they are not getting financial conditioning. They're not getting any financial coaching. They really don't understand the value of money, what money is there to accomplish. They see everything as give me whatever it is that I have this desire to have today. Instant gratification. And so all of a sudden you just shower them with all this money, they can make some really bad moves. And we see that whether it's cars or buying homes.

Spell, I used to tell this story a lot. I'll bring it up again. A lady not too far from here. She won a $90 million lottery. 90. That was her net.

Before you go any further, I would tell you my assumption would be that she along with generations to come would be set for life.

That's what you'd think.

That would be my assumption. I'd say, "Okay, they're good."

Most people have never really thought about what $90 million is.

For sure. That's a huge amount of money. 90 million could set, to your point, it could set this generation and everyone to come. And it would just get larger and larger. It'd be worth hundreds of millions of dollars after the fifth or sixth or seventh generation.

This person in a matter of six years was essentially broke.

My goodness.

$90 million. And this was an adult. This was someone well in her 40s. Won this lottery, but no financial coaching. Didn't come from anything. And that's not bad. That doesn't mean that you're illiterate. But in this case, because she never dealt with a lot of money, didn't really understand it, never saved, never understood the value of the dollar, was always broke. When she got it, she didn't think it could run out and it did. So, when I say to our clients, and I never like to tell them anything that sounds like I don't want their kids to have the money. It's never that. It's you've worked so hard to build this, why not allow it to continue, right? To be good for generations. And I think that's really where generational planning comes in. And so many people don't want to deal with it. It's work. Generational planning takes work and lots of effort, but people at 35 years old can make some bad decisions.

That's true. I might have said this on one of our shows recently. We have a client with two boys way beyond that age and they're still depending on parents. Still depending on, and heck they're not far from retirement and they're still depending on parents. So I think having the right triggers 25 30 35 that's great start but there needs to be more.

Needs to be more. And if you're not sure about it, to all of our viewers, if you're not sure about what those triggers need to be, if you want to get ideas about that, we're happy to share it with you. Put a note in the comments, ask for that. We'll share with you some of the things that we've talked to our clients about. And then we'll also put you in touch with the attorneys that we work with if you need that or help you find one in your area so you can get the kind of planning that you deserve so that you don't prematurely give away the farm, right? Might be the thing to do, but it might not.

For sure. Okay. So, the third estate planning error is a trust that's just aged out. Pretty simple. That one is probably more complex than the first two. Just again, as a reminder, number one, no estate planning documents at all. I'd say that's in terms of a score that gets a zero.

Yeah, that gets a zero.

The second is the wrong person in charge.

Okay, that gets probably a two. I would say that that's probably a two. And a trust aged out, that's more complex. You're getting into the weeds a little bit. In terms of complexity, on a scale of 10, I'd probably put that middle of the pack.

That's fair.

We'll get right back to today's show, but first I'd like to ask you a quick favor. [music] If you're enjoying this episode, hit that like button and make sure that you're subscribed to our channel so you don't miss what's coming [music] next. And hey, if something in today's episode has you wondering about your own financial plan, why not get a second opinion? Visit omnistarfinancial.com to schedule a consultation with one of our team members. It's quick, it's easy, and it could make a huge difference in your financial future. Now, let's get back to the show.

Number four, we're going to move on to number four. My will says who gets everything. So that covers my 401k, right?

Wrong. Okay, that could be right. But generally a 401k, most people don't know to name it to a will. They don't know that they can. But I would say chances are you don't want to do that. Because of the taxation that's going to follow, right? So a 401k, IRA, any of those documents, anything that we consider income with respect to decedent or anything that's considered a qualified plan, you really don't want to leave that to a trust or to a will unless there are certain circumstances involved. Now, there are times when you need to do it, right? But then you've got to go a step further and that will or that trust needs special language to be sure that you don't create this unnecessary tax that I'm talking about. Short of that, Spell, you don't want to leave it. And chances are most people don't leave it to their will.

So, but people, I know why you're talking about this because people think, well, once I have a will everything's good or if I get a trust everything's good.

Not the case, right? Unless that document is, or unless the 401k or the IRA, unless it is on the beneficiary line named to that trust or that will, that's not going by way of that will or that trust. Those documents have absolutely zero value when it comes to dictating where that trust or where that 401k or retirement plan goes.

Huh.

That's by beneficiary designation. Unless, as I said, someone did some good planning and thought beyond what we're talking about and actually named it to the trust and then had the right provisions in the trust to avoid that unnecessary tax. Huge mistake, by the way, that people make all the time. They forget that part and then they'll name one or worse, they'll name it to their minor children. Which is an even bigger issue, different show. But Spell, to your question, no, 'cause because you get a will, no, your retirement plan is not spoken for.

So, and the reason that I'm going to put this score in terms of, I won't necessarily do this as complexity, but my thought here is that when people go through estate planning, which by the way is a great thing, kudos, but estate planning is not a solution to all of your assets. But I think people get confused because estate planning is complex and they hear things on social media or they hear things on the television. Get a will, get a trust, it'll ensure that your asset, and a trust more specifically, your assets don't pass through probate, blah blah blah blah blah. Well, a beneficiary designation form supersedes that of the will, right?

Absolutely.

So, the form actually is more powerful, quote unquote more powerful than your will, than your legal document.

Absolutely. Life insurance.

Annuities. Another good one.

IRA.

401ks.

Anything with a beneficiary designation absolutely trumps your will or your trust. If you name those documents to a person, the will has no standing. The trust has no standing. It does not direct any of those assets. And other assets, if they're not named to the trust, the trust might not control those either until after death, which they can eventually control it, right? But they're still going through probate like a house. People can think that they're avoiding probate because they go get this beautiful looking will in a nice, or trust in a nice binder, but if you don't fund it, you're going through probate. If you fund it at death, still going through probate, right? You still have a probatable estate. The trust will eventually speak and control, but you're going to go through probate.

Okay. So, number four, again, I'm probably giving this a six or a seven.

Yeah, that one probably ranks pretty high. It does. It has to. Yeah, I see that mistake. Spell, I know you have a lot. In the time that I've been doing this, I can't count how many times I've heard people assume, but once they get that will or that trust, everything's good. And they forget about all these other beneficiary designated accounts, they forget them. And you can't forget those because they are not going to follow that trust like you think they are or that will.

All right. So number four is the beneficiary form wasn't completed.

Or it was completed incorrectly.

That's good. That's perfect. We're on to number five. And you started this episode with a few bits and pieces about a real story. True story. Something that we experienced recently and you don't know it but you literally said the fifth mistake in the estate planning world and that is everything's buttoned up. Those were your words. You said this family said everything is buttoned up.

Yeah. It's a common phrase for me.

So you finish the story. I'm going to let you just run with this.

Well, that story, I'll make it short. Longtime client, they felt like everything was great, buttoned up as it were, and in a lot of ways it was. In a lot of ways, it was. And in a lot of ways, it is. And so, we guided a lot of that planning. But the issue, Spell, is sometimes simplicity can overtake necessity. You can need to do things, but people want things so simple. And the KISS method is usually really good. Keep it simple, stupid. But sometimes people take that too far. And estate planning, wealth management, we can simplify it for the client in terms of how it's expressed. That doesn't take away the need to do the complex planning. Which is why we drive most of that for our clients. It's why our relationships with our clients are so tight. Because we know that has to get done and most people are not going to do it. In this case, couple things. One, they did have some pretty good documents in place. What they never believed would happen happened, right? The unbelievable can actually become believable.

True.

Because it can happen. It can and does happen. And so one person ends up in hospice unfortunately. Wonderful person. What a beautiful person, beautiful soul. And then the spouse simultaneously ends up needing some major surgery, lots of things going on. And so suddenly we have powers of attorney that are in place. He's not incapacitated, per se, but his mind is just not in the game, yet his boys, they can't just jump in and do it for him because the documents don't allow it. And so we at the 11th hour were able to get some things done for them so that family could take over. And he was so relieved because while his mind was perfectly, it was all in the right place, everything about him was great, but just distraught. Just distraught. And but distraught doesn't matter if you don't have the right people named. And so in that case, they thought everything was buttoned up. Fortunately, we got the call.

We quickly moved into solution mode, grabbed one of our attorneys on our professional advisory board and we got it done. And the unfortunate part of all of this is we lost a great client, a great friend. The rest of the family's still there and we're thankful for that. But we got things buttoned up. And that is what so many people miss. They forget that the unthinkable can become reality for sure. And it did in this case.

So what would have happened without those documents, Phil?

Well, if no one can act and if his state of mind didn't clear and a lot of the things that needed to be done, he just didn't know how to do them. His spouse did everything. And the only one with access to certain things and no one else could change that. Yet he was not incapacitated, nor did the do, even if he was, if you don't have the right people in the document, they can't take over. Without a lot of doing, court orders potentially.

And so what could have happened is things go undone, things don't get paid, things get left undone, and that can just lead to more and more and more problems. Fortunately, it didn't. But not having the right documents, not thinking about the what-ifs, and not naming people to step in should something like this happen. That can be avoided. But it requires an attorney asking the right questions or a good wealth advisory team asking the questions.

Spell, I don't want to digress, but I just remember not too many months ago I remember a situation where we were sitting with a fairly new client, not well over a year, but I remember the estate planning attorney in a meeting with you and it was literally boilerplate. And you finally stopped the meeting and you just said, "We need to ask these questions." And you looked at the client and started asking questions and before we knew it, the will and the trust was being undone because what we had was boilerplate. And now we've got some real meat in that thing for sure. Right.

And that was... It happens so many times, Phil. It's a little shocking to me. Four years ago, and this again, this is the beginning part of my career. Oh yeah. You and I went into a meeting, very wealthy clients. We're reviewing their estate planning documents like we do with every client relationship that we have. And a quick Google search and a conversation or two and we discovered that this multi-million dollar estate and all the legal documents that have been drafted were drafted by an attorney who was in prison. Remember that?

I do.

And we thought, hold on a second here. Not that necessarily that means anything's gonna be wrong with the documents, but most people don't want to find out that their attorney who drafted their documents is in prison.

So, it's more than just what's in the documents. It's who wrote them.

Who wrote them? [laughter] It's true.

And so, I think staying abreast of what's going on, staying in touch with your advisers. That team framework is so important. Makes me proud that we do it the way we do it. I know it takes a lot of effort. I know some days the team doesn't love it, but it's who we are. It's what we do. I think it's the very fabric in which we try to deliver to our clients every day. It's what we want to do. Because it really delivers better outcomes.

Well, and I'm going to ask you a question and I think that you're probably going to go the way that I want you to go with it and it's right in line with what we're talking about.

Hope I don't disappoint.

No, you won't. But every estate planning attorney has turned to YouTube and they probably have a video just like this. The number, the top five estate planning mistakes that we see, blah blah blah. Why is it important that a viewer is hearing it from a wealth management firm? Why is that important?

It's probably a lot of reasons, Phil, but I can tell you the one that comes to mind that just races to the top of my mind. We don't have a dog in that fight. I can't charge for a will or a trust. I'm not an attorney. I can't draft all these documents. This firm can't charge, nor can we share in the compensation paid to that attorney.

That's right.

That [clears throat] is a separate item.

That's right.

If you don't want to get your estate planning done, don't do it. But I'm going to work as hard as I can to change your mind because I know what it means. I've been in it long enough. You've been in it long enough. Is so important. And when people leave that out, everything they work for and everything that they believe is in good order is not. And so to me, the number one reason for all of this is that you've got to get your things in order. It matters. And there's no guarantee of tomorrow, right? We're not guaranteed that, right? And so being prepared, at the very least, we should be willing to do that. Fact that we can't get paid for it. Like I said, we don't have a dog in that fight, but I'm going to try.

Yeah, for sure. For sure.

And Phil, did I go the way you wanted me to?

You did. You did. I think that estate planning is meant to help people achieve their goals.

Yeah, it's a big part of it. It's a big part of it.

And a lot of times clients, they may not realize it, but they have goals for what they've created even after they're gone. And the only way, unless you've got some magic box that I don't know about, but the only way to achieve something from six feet under the ground is to do it while you're living. And you've got to make it part of your estate plan. It's got to be a legal document. I hate to say it and people listening may not believe it, but you can believe it. Once you're gone, people will eventually forget you.

That is true.

And unless you have it in writing and unless you have the right people managing it, whether that's individual trustees or corporate trustees, time has a way of allowing people to forget things. And so to your point, you can't do it once you're under. You got to do it while you can lay out what you want, put it in writing, and know that it's in a place that it can be delivered. And if you do that, I believe you're going to rest better at night. And hey, all these things that keep you awake at night, they don't have to. But it does take a little bit of planning. And then every few years, we ought to review it, and be sure that those life changes have not removed the efficacy of the very documents that you put in place a few years ago. Just every three, four, five years, review it, make sure it still does what you want it to do, and you probably don't have to change a thing. But if things change by way of these life events, you want to update it. Otherwise, it's all for nothing.

What's the one question that someone listening now should ask their estate planning attorney this week?

If you have a trust, ask your estate planning attorney if your trust is funded. And if it's not, ask them how you get it done. If you don't have it funded, you think you're avoiding probate, you probably aren't.

Phil, if that family had reviewed their plan one more time last year, what would that last week have looked like instead?

I think the family could have been in more of a place of peace to the extent that they could, knowing that they're losing a loved one. The last thing you want to worry about is this stuff. It's not the time to be fixing things, right? That's a time to pay respects. That's a time to get around family and be able to focus on what really matters. This isn't the time. That's not the time to worry about this, right?

And I believe if they had been willing to hear the advice over the years, and to their credit, they took a lot of the advice and they did a lot of the things that we told them to do and the attorneys that we brought to the table told them to do, but there were certainly more. There was more that could be done. And had they done that, I believe this would have been a more peaceful time. But fortunately, it all worked out.

Very good. There again.