I’m a CPA: 5 Disastrous Mistakes Senior Clients Make With Their Estate Taxes
Written by
Vance Cariaga
Edited by
Rebekah Evans
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Reaching your senior years brings about many financial changes, including planning and updating your estate to ensure your wealth goes to the right beneficiaries.
As part of the process, you’ll need to develop a strategy for estate taxes that minimizes your tax liability and maximizes the assets you pass on. Not everyone gets it right, though. Certain mistakes can have a huge negative impact on your finances.
According to certified public accountants (CPAs), here are five potentially disastrous mistakes some senior clients make with their estate taxes.
Failure To Fund Trusts
Trusts can be a powerful tool for senior clients — but only if you fund the trust, said Eliot Bassin, CPA and partner at Fiondella, Milone & LaSaracina LLP.
“Too often clients set up trusts, but do not actually transfer the intended assets to the trust,” Bassin said. “The effect is to inflate the client’s estate and ultimately subject more assets to transfer taxes.”
Picking the Wrong Executor
This mistake was cited by Mark Luscombe, CPA and principal analyst at Wolters Kluwer Tax & Accounting
“Choosing an executor or trustee based on family ties without taking into account issues of knowledge or impartiality [can result] in potential disputes or litigation,” he explained.
Improper Use of Irrevocable Living Trusts
Using an irrevocable living trust can be a major benefit in estate planning when done the right way, according to Gene Bott, CPA, tax advisor and partner at Tax Hive. But you can take a big financial hit if you don’t understand the tax implications.
“They can trigger unexpected tax consequences now, significantly reduce options for step-up in basis for your heirs upon death or strip away control of assets that are still critical,” he said.
Not Updating Beneficiary Information
Seniors often overlook the need to update beneficiary designations when reviewing or updating their estate plans, Bassin said. This mistake could lead to someone other than the intended beneficiary receiving the assets.
As an example, he cited a taxpayer who never changes a beneficiary designation following a divorce, which could pass assets unintentionally to an ex-spouse.
“In addition, a client who named their estate as the beneficiary of a life insurance policy could inadvertently subject these assets to estate taxes,” Bassin added. “Life insurance proceeds typically pass to the beneficiary tax free, unless the policy is owned by the decedent or the beneficiary is the estate. This can have very negative estate tax consequences.”
Not Using Annual Gift Tax Exclusions
As Bott noted, seniors can give certain amounts to individuals and still be exempt from reporting the gift. In 2026, that amount is $19,000 per recipient.
“Each taxpayer can give that amount, so a married couple can give the same person $38,000 without being required to file a gift tax return,” Bott said. “This adds up fast, especially because it is an annual exemption that allows you to spread gifts over many years.”
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