In this episode, we pick up where we left off—diving into the second half of the top ten estate planning mistakes people make and how to avoid them. Trusts are where we pick up the conversation, and we emphasize that they are tools, not one-size-fits-all solutions. Using the wrong trust, or one that isn’t necessary, can actually create more problems than it solves. We stress the importance of intentionality—choosing the right tool for the right issue, and understanding the specific goals and laws relevant to each person’s situation, especially given varying state estate tax thresholds like Oregon’s low $1 million.
From there, we explore how conflicting or vague instructions can derail even well-meaning plans. When wills, trusts, and beneficiary designations don’t align, chaos can follow. “Fairly” and “equally” may seem interchangeable, but they’re not, and those subtle differences can lead to confusion, resentment, or even legal battles. We also caution against naming just one child with the “plan” that they’ll distribute assets informally—that’s a recipe for tax issues and strained family dynamics.
Ignoring taxes is another frequent oversight. Many people don’t realize how estate planning decisions can trigger income, capital gains, or estate taxes. Planning won’t erase taxes, but it can eliminate nasty surprises. We revisit digital assets too—crypto, photo storage, password managers—emphasizing that if no one can access them, they may as well not exist. These assets require thoughtful handling, not just from a distribution standpoint, but also accessibility.
Finally, we tackle the often-overlooked issue of naming the wrong fiduciary. This isn’t an honorary role—it’s a job. Too often people pick fiduciaries based on birth order, guilt, or assumptions rather than capability and willingness. We share stories illustrating how the wrong choice can create unnecessary complications, and how the right person isn’t always the obvious one. Jag shares how he's not at all upset that his brother is in charge of their parents' estate.
To wrap, we recap all ten estate planning pitfalls discussed across both episodes and remind listeners to align legal documents, assets, and intent—while working with professionals who know how to navigate the complexity.
ThimbleberryU 140 -Estate Planning Pitfalls and How To Avoid Them (Part 2)
Speakers: Jon Gay & Amy Walls
[Music Playing]
Jon Gay (00:08):
Welcome back to ThimbleberryU, I'm Jon Jag Gay. As always, I'm joined by Amy Walls of Thimbleberry Financial. Hello, Amy.
Amy Walls (00:13):
Hi Jag.
Jon Gay (00:14):
So, last episode we talked about estate planning mistakes and how to avoid them. We've got 10 that we're talking about. We did five last time, we’ll do five this time. And where we left off last time, we were talking about trusts, which is where we'll pick it up from here.
What about wrong and unnecessary trusts? What's the problem with using a trust just in case?
Amy Walls (00:33):
Jag, let me answer that in a roundabout way. We have a remodel going on, we're finishing our basement. And imagine that they're putting up one of the walls and needing to use what we'd normally call a hammer, and they don't have it. And they tried doing it with a screwdriver.
Jon Gay (00:52):
(Chuckles) Okay.
Amy Walls (00:54):
The hammer and the screwdriver serve different purposes. They're tools, right? And you laughed because obviously, you're not going to put up a wall with a screwdriver.
Jon Gay (01:05):
(Laughs) I’m laughing again.
Amy Walls (01:05):
So, estate planning vehicles, trusts being one of them, are tools. And if you don't know what problem you're solving, the tool you choose might hurt more than help.
So, it's about being intentional, something we talk about regularly: what problem are we looking to solve and what's the right tool to do so? Just assuming a trust is, isn't necessarily accurate. And there's also lots of different trusts that do lots of different things.
Some people use complex tax planning trusts when their estate isn't taxable. Some of that depends on what state you live in too. Some states have a very low estate tax threshold while others, it's much higher. Some people might only worry about the federal estate tax and not think about their state estate tax, which here in Oregon, it's a million dollars. It's one of the lowest.
So, other people will skip trusts they actually need, for example, when protecting minors or vulnerable beneficiaries. So, it's all about what problem can be identified in your situation, and do you agree it needs to be solved, and then you start applying the tools.
Jon Gay (02:14):
And you need to talk to a professional who understands this stuff. Don't use a trust when you don't need it, don't skip a trust when you do need it.
Amy Walls (02:20):
And don't forget to fund it.
Jon Gay (02:21):
Yes, we talked about that last time.
Amy Walls (02:23):
Yes.
Jon Gay (02:24):
Alright, next on our list, conflicting or confusing instructions, can you give me an example of how things might go sideways in this regard?
Amy Walls (02:31):
Yeah, let's take a will. Maybe, the will says divide everything fairly, and there's also a trust, and the trust says divide everything equally.
Jon Gay (02:41):
Those are two very different terms, fairly and equally.
Amy Walls (02:44):
Yep. And then IRA names just one of three children. Well, obviously, if listeners haven't listened to our last episode, they probably should, but the IRA beneficiary designation is going to trump whatever the will or the trust says. So, that one child listed there is going to get everything.
This one's also hard because we've often heard people say, “Well, it's okay if I just name one child. They will be responsible for handing everything out to their siblings.”
Jon Gay (03:10):
No, no, that's a big mistake.
Amy Walls (03:11):
That doesn't work either. And it puts a tax burden on them, and that's going to create lots of issues. So, that is confusing or conflicting instructions also because maybe a conversation happens with all three children and it’s, “You guys all get this equally,” and then one child's named — well, the other two children probably have an expectation they're going to split that, but they've been stuck in a really bad position to do that.
Jon Gay (03:36):
And that one child is being given the tax burden and the emotional burden at the same time.
Amy Walls (03:41):
Exactly. They've been set up to not win with their siblings. But going back to what you said, the will says divide everything fairly and the trust says divide everything equally. Those are vague instructions, they don't match, and this is where families wind up confused, upset, or even in court.
Jon Gay (04:00):
Equally could be math, fairly is very subjective. Maybe one child is very successful financially and one child is having a hard time making ends meet, and then that becomes what's fair? There's not a legal definition of that. It's totally subjective.
Amy Walls (04:13):
Yes, you are absolutely correct.
Jon Gay (04:16):
Alright, next on our list is ignoring taxes. And this often doesn't mean any malice, it just might mean someone's not educated. Do most people even realize how taxes show up in estate planning?
Amy Walls (04:27):
I'm going to say most often not.
Jon Gay (04:30):
Yeah.
Amy Walls (04:31):
Inherited IRAs for example, create taxable income, investment gains have the potential for capital gains, but often, can be avoided, it depends. Large estates, or even in some of the states like Oregon with a lower estate tax threshold, it's possible estate tax.
So, planning doesn't eliminate tax, whether financial planning or estate planning —it doesn't eliminate tax, but it does help avoid surprises, and that's important to know.
Jon Gay (05:04):
Got it.
Amy Walls (05:04):
Because taxes come in multiple ways.
Jon Gay (05:07):
We've covered that in many episodes of this podcast (chuckles).
Amy Walls (05:09):
Yes.
Jon Gay (05:10):
Alright. Overlooking digital assets, something we've also talked about in previous episodes, what kinds of things count as digital assets when we're talking about estate planning?
Amy Walls (05:18):
First, there's a list, and this is so often overlooked. Crypto would be one, cloud photo storage.
Jon Gay (05:25):
Okay.
Amy Walls (05:26):
Password managers, email accounts. And here's the problem with these — if no one knows how to access them, they may as well be gone. So, it's not just who gets these things, but does anyone know how to get at what's inside of them?
Jon Gay (05:43):
We've talked about password managers and the ability to have, in case of emergency contact, sort of a beneficiary designation so to speak. And I'm glad you mentioned photos too, because you don't think of that as an asset, having a financial number tied to it.
But my guess is if you've got all these great pictures from over the years (family, friends), you would probably want those to go into somebody else's possession to have going forward.
Amy Walls (06:07):
Absolutely. We are about to go on a trip, and we were going to print some photos, and it occurred to me that other than this book I made for my 17-year-old when they were 4, they have no printed photos.
Jon Gay (06:20):
Interesting.
Amy Walls (06:22):
We have no printed photos that they would have access to. So, if my husband and I passed away, they're without any visual childhood memories.
Jon Gay (06:32):
Wow, that's quite a statement to think about.
Amy Walls (06:35):
Yeah. And I think about I used to love as a kid going through my parents' photo albums and we had this big box with photos, and whether I knew who the people were or not, I could recognize my parents and that was fun. And my brother and I, and there's a whole history that's going to be lost if those aren't passed forward.
Jon Gay (06:55):
I'll tell you a funny story — there were a lot of slides of my wife as a kid.
Amy Walls (06:59):
We’re dating ourselves.
Jon Gay (07:01):
Yes, I know, I know. But there were no slides of her brother. Her brother had pictures, and she had the slides. He's four or five years younger than her. So, it's funny how you only took pictures of me, you only took pictures of … nope, just different media formats.
I will put a plug in here. There are a lot of companies that will digitize, whether it's cassette tapes, VHS tapes, slides, prints, things like that. And maybe if you don't want to have that shoebox to move from house to house or that big crate of all these stuff, having the printed stuff is great, to your point, Amy.
But if you want something that's a little bit more portable, there are ways to digitize all of these things. And a lot of that physical media will degrade over time. So, sometimes, it's good to have a digital copy.
Amy Walls (07:41):
Absolutely.
Jon Gay (07:43):
Alright, final thing on our list: choosing the wrong fiduciary, I feel like this could be its own podcast. These are the people that are carrying out your wishes, right?
Amy Walls (07:51):
Yes. And this is such a big topic. I think I'll have to put it on a list for a future podcast topic since you said that. Too often, I think people are chosen based on guilt, birth order, or assumptions.
Jon Gay (08:06):
What do you mean by guilt? Let me stop you there.
Amy Walls (08:07):
Let's say you have three children, and you need to name a fiduciary. You need to name someone to take care of settling your estate whether you have a will or a trust. And most people, when they have kids, you're going to think of, okay, I choose from my children on this. They're likely to outlive me, they're going to be in a position to handle this.
I need to pick the first one just so this goes to birth order, but I think it fits just because if I overlook them and I pick the third, both my first and second are going to be hurt and think I don't care about them.
Well, they might, but the reality is this is a job. Settling an estate is a job, it's not honors. It's not giving them a big ribbon of you're my favorite. And you want to pick someone who's organized, steady, trustworthy, and willing to serve in this capacity.
If you are picking your firstborn, for example, because that seems like the easy way to go, and that person doesn't balance their checkbook, they don't check their mail on a regular basis, those sorts of things — that is not the person to fill this role.
Jon Gay (09:16):
I think of a family member who was third of four in her birth order, and she was made in charge of the estate by her parents when they passed. And there were some hurt feelings, but the parents knew that she was one of the four best equipped to handle it. That's a great point.
Amy Walls (09:32):
Yes. An example of maybe a place where maybe a different child could be chosen is (this is a real story) — someone I know chose their adult son as trustee because he was the eldest, but he worked 70 hours a week, he lived out of state, and he hated doing paperwork.
Jon Gay (09:49):
Oh geez.
Amy Walls (09:52):
His younger sister lived there where the parents lived, handled all the family logistics already. She wasn't even listed as a backup. So, this plan looked great, if you will, on paper, but it didn't work in practice when you actually dug into it.
Jon Gay (10:10):
I will say, because it is quite a job to handle an estate, I am one of two. I have a younger brother. My brother is better at business than I am. I'm the social one, he's the business acumen one. And my parents put him in charge for when the time comes because he's better with this stuff than I am. And I am not upset about it because it is not my job.
[Laughter]
Amy, before we wrap up, I'm going to do a quick recap of the 10 estate planning pitfalls we covered in the last episode and today. They are not having a will, outdated documents, bad beneficiary designations, unfunded trusts, no planning incapacity, wrong or unnecessary trusts, conflicting or vague instructions, ignoring or not knowing about taxes, overlooking digital assets, and as we just talked about, choosing the wrong fiduciaries.
If somebody listening wants to talk to you and your team at Thimbleberry Financial, anything related to estate planning or their financial future in general, what are the best ways to find you?
Amy Walls (11:07):
They can give us a call at (503) 610-6510, or find us online at thimbleberryfinancial.com.
[Music Playing]
Jon Jag (11:15):
Great stuff, Amy, we'll talk again soon.
Amy Walls (11:16):
Sounds good, Jag.
Voiceover (11:17):
Securities offered through registered representatives of Cambridge Investment Research, Inc, a broker dealer, member of FINRA/SIPC, advisory services through Cambridge Investment Research Advisors, Inc, a registered investment advisor. Cambridge and Thimbleberry Financial are not affiliated.
Discussions in this show should not be construed as specific recommendations or investment advice. Always consult with your investment professional before making important investment decisions.
Securities offered through registered representatives of Cambridge Investment Research, Inc, a broker dealer, member FINRA/SIPC, advisory services through Cambridge Investment Research Advisors, Inc, a registered investment advisor. Cambridge and Thimbleberry Financial are not affiliated.