Originally published April 2015. Last updated March 2026.
Estate planning mistakes can cost your family time, money, and heartache. Most of them are preventable. Here are eight oversights that come up repeatedly.
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1. Ignoring Trust Income Tax Consequences
Revocable trust assets count toward the federal estate tax exemption ($13.99 million per person in 2025, dropping to roughly $7 million in 2026 when the Tax Cuts and Jobs Act sunsets). But trusts that earn income have their own compressed tax brackets. A trust hits the top 37% federal bracket at just $15,200 in taxable income (2025), compared to $626,350 for individuals. Structure your trust to distribute income to beneficiaries when possible to avoid this.
2. Choosing the Wrong Trustee
Your trustee manages assets, files tax returns, and makes distribution decisions. Don’t pick someone just because they’re family. Pick someone who’s financially competent, trustworthy, and willing to serve. Consider a corporate trustee for larger or more complex estates.
3. Failing to Update Beneficiary Designations
Retirement accounts, life insurance, and bank accounts pass by beneficiary designation, not by your will. An ex-spouse still listed as beneficiary on your 401(k) will receive the money regardless of what your will says. Review designations after every major life change.
4. Not Planning for Incapacity
Estate planning isn’t just about death. A durable power of attorney and healthcare directive let someone you trust make financial and medical decisions if you can’t. Without these, your family may need a court-appointed conservatorship, which is expensive and slow.
5. Leaving Assets Outright to Irresponsible Heirs
A 25-year-old receiving $500,000 with no strings attached often doesn’t end well. Trusts let you control timing (staggered distributions), conditions (matching work income), and protection from creditors and divorcing spouses.
6. Ignoring State Estate and Inheritance Taxes
Kentucky has no state estate tax, but it does have an inheritance tax. Class A beneficiaries (spouse, children, grandchildren, parents, siblings) are exempt. Other beneficiaries pay 4-16% depending on relationship and amount. If you have beneficiaries outside Class A, plan accordingly.
7. Not Funding the Trust
Creating a trust but not transferring assets into it is like buying a safe and leaving it empty. Real estate needs to be re-deeded. Bank and brokerage accounts need to be retitled. If assets aren’t in the trust, they go through probate anyway.
8. Treating Estate Planning as a One-Time Event
Laws change. Families change. Assets change. Review your estate plan every 3-5 years or after any major life event: marriage, divorce, birth, death, significant asset change, or a move to a different state.
FAQ
What’s the annual gift tax exclusion?
$19,000 per recipient in 2025 ($38,000 for married couples). Gifts within this limit don’t require a gift tax return and don’t count against your lifetime exemption.
Do I need both a will and a trust?
If you have a trust, you still need a “pour-over will” to catch any assets not transferred into the trust during your lifetime. The will directs those assets into the trust through probate.
Is the $13.99M estate tax exemption really dropping?
As currently written, yes. The exemption is scheduled to drop to roughly $7 million per person in 2026. Congress could extend it, but planning as if it will drop is the prudent approach.
Schedule a free 20-minute consultation to review your estate plan for these common oversights.
R.L. Brown Wealth Management
106 W Vine St, Suite 300, Lexington, KY 40507
859.317.5889
