📝 Top 5 Estate Planning Mistakes to Avoid in New Jersey

Estate planning protects your legacy, your loved ones, and your peace of mind. Yet many NJ families fall into avoidable traps that complicate their plans.

Here are 5 of the most common mistakes we see—and how to avoid them:

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1. Failing to Update Wills and Estate Documents

Your estate plan should evolve with your life. Major events such as marriage, divorce, the birth of a child or grandchild, or the death of a loved one often require updates to your will, trust, or other legal documents.

Even minor life changes, like a change in financial status or acquiring property in another state, can affect how your estate is handled. A regular review—ideally every three to five years or after any major life event—can ensure your documents remain accurate and effective.

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2. Overlooking Non-Probate Assets: Beneficiaries and Titling Mistakes

Assets like IRAs, life insurance, and jointly owned property pass outside your will.

Beneficiary Designations Override Your Will: A common mistake is failing to name beneficiaries—or not updating them after major life changes – because even if the will says one thing, a beneficiary designation on an account or life insurance policy will control who receives that asset.

Improper Asset Titling Can Derail Your Plan: A common example: adding one child as joint owner and “trusting” them to share. This isn’t legally enforceable (left out heirs may have to file a court action)—and if they do share, it’s considered a gift, which may affect their taxes or Medicaid eligibility,

To avoid these complications, asset titling must be done deliberately and strategically as part of a comprehensive estate plan.

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3. Overlooking New Jersey Inheritance and Estate Taxes

While New Jersey eliminated its estate tax in 2018, the inheritance tax is still very much alive—and it can apply in some unexpected ways.

Who Pays?

Inheritance tax in New Jersey is based on the recipient’s relationship to the deceased:

• Class A beneficiaries (spouse, parents, grandparents, children, and stepchildren) are exempt.
• Class C and Class D beneficiaries (siblings, nieces, nephews, friends, and more distant relatives) may owe between 11% and 16% on what they inherit.

The Quirky Case of Step-Grandchildren

Here’s a lesser-known twist: while stepchildren inherit tax-free, step-grandchildren do not. That means if you leave part of your estate to a step-grandchild, they could be hit with a significant tax bill—just because of how the state classifies them.

Smart planning can help reduce or avoid these taxes.

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4. Not Having Proper Powers of Attorney and Advance Directives

Planning isn’t just about what happens after death—it’s also about protecting yourself during your lifetime. If you become incapacitated due to illness or injury, having a Durable Financial Power of Attorney and Advance Healthcare Directive ensures someone you trust can manage your affairs and make medical decisions on your behalf.

The Pitfalls of Online Templates

One critical mistake we often see is relying on generic online forms to create powers of attorney. These documents may appear convenient, but they are rarely tailored to New Jersey law—and can create significant issues down the road.

In particular, many of these templates:

• Use outdated or vague language that may not be accepted by financial institutions.
• Lack critical powers needed for long-term care or Medicaid planning—such as the ability to make gifts or establish trusts.

Important note: Including gifting powers is not the default and should only be added after careful analysis by an experienced attorney. These powers carry serious implications and must be crafted in alignment with your broader estate and asset protection plan.

Without the right language, your chosen agent may be unable to act on your behalf effectively—forcing your loved ones to go to court to obtain the necessary authority.

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5. Failing to Plan for Long-Term Care Costs

The cost of long-term care in New Jersey is among the highest in the country. Without proper planning, a prolonged nursing home stay can rapidly deplete your estate and leave fewer assets for your loved ones.

Many families assume Medicare will cover these expenses, but Medicare only pays for short-term skilled nursing care. Medicaid, which can cover long-term care, has strict income and asset requirements. Planning ahead is crucial to qualify without having to spend down all of your assets.

Strategies to consider include:

• Purchasing long-term care insurance
• Establishing a Medicaid Asset Protection Trust (MAPT)
• Ensuring your powers of attorney authorize key asset protection actions

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✅ Final Thoughts

Estate planning in New Jersey is not a one-size-fits-all process. By avoiding these common mistakes and working with a knowledgeable attorney, you can ensure your plan truly reflects your wishes, minimizes potential disputes, and protects your loved ones.

📞 If you’d like to review or update your estate plan, or if you have questions about how these issues might affect you, we’re here to help.