How to Make Your Financial Estate Plans

How to Make Your Financial Estate Plans

Planning your financial estate affairs provides confidence for your retirement years and for your family after your death. It also allows you to save for your children’s and grandchildren’s education, if desired, and to invest wisely with the goal to achieve maximum gains with minimum tax liability.

To manage all these tasks properly, it often takes a team of qualified advisors to assist you. A CERTIFIED FINANCIAL PLANNER™ professional can work with your certified public accountant (CPA) for tax purposes, and an estate planning attorney can ensure your assets go to the people you intend to receive them. Together, this team can help you potentially avoid expensive and devastating mistakes that could cost you and your loved one’s money.  

Financial Estate Plans – Common Mistakes

It can be tempting to put off making estate decisions or to try to handle certain tasks yourself to avoid paying a professional. While it is certainly possible to manage some of them on your own, all too often mistakes are made without realizing it. In our blog, “Mistakes in Estate Planning”, CFP® professional Elijah Heath at Heath Wealth Management details actual stories of clients whose final wishes were not carried out as they wanted, despite making certain plans. 

Examples of common mistakes include: 

  • Financial procrastination
  • Outdated wills and forms
  • Updating your beneficiaries
  • Failure to fund a trust
  • Making children joint owners of your assets
  • Inadequate financial planning
  • Triggering estate tax through life insurance

Financial Procrastination

According to a 2021 study by (, those with assets over $80,000 are twice as likely to have estate planning documents compared to those with $25,000 in assets. Over 70% of respondents agreed it was very important to have a will or living trust, but the top reason for not doing it was procrastination. 

When a person dies without a will and beneficiary forms, it is referred to as “dying intestate”. The result is that the courts will handle your financial affairs and decide who gets what assets – whether you intended them to benefit or not. 

Many younger people mistakenly think wills are for old people, so they delay having these documents prepared. This is a big mistake, especially if you have young children who need a guardian and financial support for years to come. Even when assets are not substantial, your money must still go somewhere when you, as a parent, die. 

You should also consider situations where you may be seriously injured or suddenly too ill to make decisions. Under these circumstances, it is very important to have a will, financial power of attorney, and healthcare directives. 

Outdated Wills and Forms

Once you spend the time and money to create your will and other necessary forms, you must continue to review your documents regularly. Ideally, you should do this every 18-24 months. At a minimum, plan to review your documents at least every five years. You can also consider times of celebration – marriages, the birth of a child, graduation, even divorce – as a good time to review how these changes may impact your financial and estate plans. 

Over time, your life circumstances will change and laws impacting your decisions can change. For example, you may have set up an education fund when your first child was born but failed to create accounts when more children were born. Or a young adult who listed their parents as beneficiaries and then forgot to update their information when they married. It is extremely important to make a plan to regularly review your will and other estate planning documents with a trusted professional who can guide you on the necessary changes. 

Updating Your Beneficiaries

Some assets allow you to name beneficiaries and contingent beneficiaries on items such as IRAs and 401(k) accounts, life insurance policies, and annuities. This allows these accounts to avoid the probate process required for wills. 

These are often the largest assets most people own. It is important to remember that beneficiary information is legally binding and supersedes any contrary wishes you may have in your will. For example, if you name your spouse as the beneficiary on all retirement accounts, but later change your will to name your child as the designated recipient, your spouse remains the legal beneficiary of those funds. 

There are many situations where you may have been prompted to change your will, such as a marriage or divorce, or the birth of a child, but forgot to update your beneficiaries of those specific assets. An experienced financial planner can assist you in reviewing all documents for needed updates when making such changes. Many CFP® professionals, such as Heath Wealth Management, schedule annual reviews and will cover such life events that may impact your financial accounts.

Additionally, accounts and property jointly held will pass on to the surviving owner(s). You cannot name someone else as a beneficiary in your will to receive the joint asset instead of the joint owner. Discuss such circumstances with an experienced professional such as an estate planning attorney and your CERTIFIED FINANCIAL PLANNER™. 

Failing to Fund a Trust

A trust account can provide several benefits: assets are protected from creditors, distributed to heirs in a timely manner, and allows you to keep your information private. A will becomes a public document once filed in probate court, so a trust makes sense when you want your assets, debts, and named heirs to remain private.

It is a common mistake to set up a trust but then fail to move assets into the trust, known as funding, or titling, the trust. Assets such as your home and other real estate, stocks, cash, and mutual funds must be moved into the trust after it is set up. When assets are not moved into the trust, the assets must go through probate, which is a time-consuming and expensive legal process. 

Administering your trust after your death can be challenging. Many people name a spouse or child to carry out their wishes, but that person may lack the time, knowledge, or ability to do so properly. In some cases, you may want to consider a third-party or professional successor trustee to handle your estate. 

Making Children Joint Owners of Your Assets

While it may sound like a good idea to add your children as joint owners of certain assets, the downside is that it gives their creditors access to your assets. In order to protect such assets, consider naming your child as your power of attorney and a payable-on-death beneficiary through your bank and other accounts. Your child will have access to the funds while you are alive if needed, but their creditors will not have access to your funds. 

Consider a situation where your child has a large financial loss – a business failure, for example – and his bank files liens with other banks to locate other accounts he may have to repay the money he owes. If your child is a co-owner of any of your bank accounts, the creditor could take all your funds. Setting up your accounts to protect you and joint owners is essential to your financial estate plans. 

This can also be a problem if you add your child as a co-owner to your home with rights of survivorship. The benefit of making this decision is that the home avoids probate later. However, the value of your home will be considered a gift and your child will owe capital gains taxes when it is sold. Additionally, if your child has debts, some states allow creditors to force the sale of your home in order to access your child’s portion of the home’s value.

Inadequate Financial Planning

When making your financial and estate plans, you may be tempted to only consider who gets your assets when you pass. Unfortunately, there is no way to know when that will occur. You may spend many years in retirement, dependent on your financial assets to provide for long-term care at home or in a care facility. You must consider not only your anticipated living expenses, but other items such as home and vehicle maintenance, and the rising costs of medical care and health insurance. Married couples must also anticipate and plan for any income loss when one spouse passes away. 

Nursing home costs are close to $100,000 a year, which can wipe out your financial assets quickly. Medicaid requires individuals to spend almost all their assets on their care before they qualify for Medicaid. Long-term care planning options should be reviewed with your financial and estate planning professionals to ensure you can cover your expenses. There are options that can protect your assets from this required Medicaid spend down. 

Triggering Estate Tax Through Life Insurance

Life insurance payments are usually tax-free when the beneficiary – usually a spouse – receives them. However, if the surviving spouse then passes away with remaining life insurance funds in their estate, that money could now be subject to estate tax. This can be particularly impactful for anyone with a very large life insurance policy. 

In 2021, an estate that exceeds $11.7 million per person (or $23.5 million for a married couple) is subject to a 40% federal estate tax. Individual states may have different exemption amounts and their own state estate tax, so be certain to check this information for your state. The best protection from such estate taxes is to move large life insurance policies into an irrevocable life insurance trust (ILIT) with the help of an experienced estate planning attorney. 

Final Thoughts

Discuss your decisions with your family and designated representatives prior to your death. This may seem unusual, but it can prevent future disputes and costly litigation among your heirs later. It also ensures your beneficiaries understand your final wishes rather than being confused by your financial and legal documentation. 

We’re Here To Help You 

Elijah Heath, a CERTIFIED FINANCIAL PLANNER™ professional, is a *fiduciary with an ethical obligation to provide information, products, and services in your best interest, not what earns him the best fee or commission. Heath Wealth Management wants to be your advisor for life so you, your children, and your grandchildren all benefit from the relationship.

Call us to learn more, ask questions about your specific circumstances, and determine if we are the right fit for you. Our phone number is 813-556-7171. We can also be reached by email at