Estate Planning Horror Stories
Five Real-Life Nightmares That Shouldn’t Happen to Your Family
1/22/26 - As an estate planning attorney, I’ve seen firsthand how unfinished legal business can haunt families long after a loved one has passed away. Most ghost stories revolve around unresolved matters—unfinished business that keeps the departed from resting peacefully. In real life, the same concept applies to estate planning. When someone dies without a clear, current, and properly executed estate plan, including strategies for estate tax reduction, the people left behind are often forced to navigate confusion, conflict, court proceedings, and unexpected financial consequences. Grief is hard enough without legal chaos layered on top. Unfortunately, these situations are far more common than most people realize. Below are five real-world estate planning “horror stories.” They’re unsettling—but they also serve as powerful reminders of why proactive legacy planning matters, especially when it comes to trusts and inheritance.
The Case of the Missing Documents
Estate planning documents exist for one purpose: to make your wishes clear and legally enforceable. When these documents are missing—or improperly prepared—families can find themselves trapped in prolonged and expensive legal battles, which can hinder effective legacy planning and even complicate estate tax reduction efforts.
Consider the estate of broadcasting legend Larry King. Larry King passed away in January 2021, leaving behind an estate estimated at $2 million. Two years earlier, he had written a brief handwritten letter stating his intent to divide his assets equally among his children.
While California law can recognize handwritten wills, that letter raised more questions than it answered. Among them:
Who was supposed to administer the estate?
What happened to the shares of two children who passed away after the letter was written but before King’s death?
How should debts owed to the estate be handled—especially when one potential administrator had borrowed heavily from his expected inheritance?
Did the letter override a prior will that named King’s then-wife as executor?
Was King legally competent to write the letter after suffering a stroke?
Years later, the family remained locked in litigation—spending significant time, money, and emotional energy fighting over issues that could have been avoided with a properly updated estate plan that included trusts and inheritance strategies.
The legal takeaway:
Good intentions are not enough. Informal documents, outdated wills, and missing executors often lead to exactly the opposite of what the deceased intended.
The Revenge of the Abandoned Estate Plan
Creating an estate plan is important, and maintaining it is just as critical for effective legacy planning. Filmmaker John Singleton passed away in 2019 at just 51 years old. When he became incapacitated prior to his death, his family discovered that he had never signed medical directives or powers of attorney—triggering a dispute over who could make decisions on his behalf.
Even more shocking: Singleton’s will had not been updated since 1993. In the decades that followed, he had six additional children—but his estate plan did not reflect those life changes. With an estate estimated at $38 million, the result was predictable: litigation, family conflict, and lasting damage to relationships. Additionally, an outdated estate plan can complicate matters regarding estate tax reduction, further stressing families during difficult times.
The legal takeaway: Estate plans must evolve as your life changes. Births, deaths, marriages, divorces, and health events should always prompt a review with an attorney, especially when considering trusts and inheritance.
The Nightmare of the Wrong Fiduciary
A fiduciary—such as an executor, trustee, or agent under a power of attorney—holds tremendous power in matters of estate management. Choosing the wrong person can lead to financial devastation, especially when it comes to legacy planning and estate tax reduction.
Beverley Schottenstein trusted her grandsons, who were also financial advisors, to manage her $80 million estate. Instead, they allegedly placed her funds into excessively risky investments to generate commissions for themselves. They also ran up thousands of dollars in unauthorized charges, eventually triggering account freezes. Although Ms. Schottenstein ultimately prevailed in court and was awarded damages, the case permanently fractured her family.
The legal takeaway: Fiduciaries must be chosen carefully. Family relationships do not automatically translate into ethical or competent financial stewardship, especially when dealing with trusts and inheritance.
The Beneficiary You Forgot to Change
One of the most common—and costly—mistakes in estate planning is failing to update beneficiary designations, which can significantly affect your legacy planning and estate tax reduction strategies.
In the case of Egelhoff v. Egelhoff, a divorced man died just two months after his divorce was finalized. He had not updated the beneficiaries on his life insurance and pension accounts. Under federal law, those assets passed directly to his ex-spouse—not to his children. Despite legal challenges, the children received nothing, highlighting the importance of proper trusts and inheritance planning.
The legal takeaway: Beneficiary designations override wills. If they are outdated, your assets may go to someone you never intended.
The Empty Trust
Many people believe that simply creating a trust is sufficient for estate tax reduction and that it avoids probate. Unfortunately, that’s only true if the trust is properly funded.
In one case, parents established a trust but never transferred key financial accounts into it. When they passed away, those assets remained in their individual names, forcing their son into probate and exposing the estate to potential tax consequences that the trust was intended to mitigate through effective legacy planning.
The legal takeaway: A trust without assets is an empty shell. Funding and coordination are just as important as the document itself when it comes to trusts and inheritance.
Don’t Let These Stories Become Your Family’s Reality
Estate planning is not just about paperwork—it’s fundamentally about protecting the people you love when they are most vulnerable. Effective legacy planning ensures that your wishes are honored and that your family is taken care of in times of need.
The good news is that every one of these situations was preventable. Regular reviews, proper execution, thoughtful fiduciary selection, and coordination between legal and financial assets can spare your family years of stress, expense, and conflict, while also providing opportunities for estate tax reduction.
If it has been years since your estate plan was created—or if your life has changed since then—it may be time for a review. This is especially crucial if you want to ensure that your trusts and inheritance are structured to benefit your loved ones most effectively. Give us a call at 855-978-6564 or email us at estates@ginsburglawgroup.com.
This article is for educational purposes only and does not constitute legal advice. Estate planning laws vary by state and individual circumstances. If these issues resonate with you, consult a qualified estate planning attorney to discuss your specific situation.
How Estate Planning Can Help You Get a Step-Up in Basis
...And Reduce Taxes
1/16/26- One of the most powerful — and often misunderstood — tax benefits available through estate planning is the step-up in basis. When utilized properly, this rule can facilitate estate tax reduction by eliminating or significantly reducing capital gains taxes for heirs, thereby preserving more of a family’s wealth. Understanding how a step-up in basis works — and how effective legacy planning techniques, including trusts and inheritance strategies, can help maximize it — is essential for anyone who owns appreciated assets.
What Is a Step-Up in Basis and Why it Matters
"Basis" generally refers to what you paid for an asset, adjusted over time for improvements, depreciation, or other factors. Capital gains tax is calculated based on the difference between the asset’s basis and its sale price.
A step-up in basis occurs when a person dies, and certain assets are transferred to heirs. Instead of inheriting the original purchase price, the heir’s basis is "stepped up" to the fair market value of the asset as of the decedent’s date of death (or an alternate valuation date, if elected).
Example:
Parent buys stock for $50,000
Stock is worth $300,000 at death
Heir inherits the stock with a basis of $300,000
If the heir sells immediately, there is little or no capital gains tax.
Without the step-up, the heir would owe tax on $250,000 of gain.
Why the Step-Up in Basis Matters - For many families, the largest assets — homes, rental properties, investment portfolios, and business interests — have appreciated significantly over time. This is particularly relevant in the context of estate tax reduction and legacy planning.
The step-up in basis can:
- Eliminate decades of built-in capital gains
- Reduce or eliminate capital gains tax upon sale
- Simplify tax reporting for heirs
- Preserve more wealth across generations through effective trusts and inheritance strategies.
This benefit can often outweigh other tax considerations when structuring an estate plan.
Assets That Typically Receive a Step-Up in Basis and Do Not Receive a Step-Up in Basis
Assets That Typically Receive a Step-Up in Basis - Most assets included in a person’s taxable estate qualify for a step-up in basis, which is crucial for effective legacy planning. These assets include: Real estate (primary residences, vacation homes, rental properties), stocks, bonds, and mutual funds, business interests, certain trust assets, and personal property with appreciated value. However, not all assets receive a step-up, emphasizing the importance of careful planning, especially for those focused on estate tax reduction.
Assets That Do Not Receive a Step-Up in Basis - Some commonly held assets are excluded from step-up treatment, including retirement accounts (IRAs, 401(k)s, pensions), annuities (to the extent of ordinary income), and assets gifted during life, which generally carry over the donor’s basis. This highlights why gifting assets during life can be beneficial for estate tax reduction, yet it may also lead to unintended income tax consequences, particularly when considering trusts and inheritance.
Estate Planning Techniques That Preserve or Maximize a Step-Up in Basis
1. Holding Appreciated Assets Until Death - One of the simplest strategies for estate tax reduction is often the most effective: do not gift highly appreciated assets during life unless there is a compelling reason to do so. Assets held until death generally receive a full step-up in basis, while lifetime gifts transfer the original low basis to the recipient. This is especially important for legacy planning involving:
- Long-held real estate
- Low-basis stock portfolio
- Family business interests
2. Using Revocable Living Trusts - Assets held in a revocable living trust are still considered part of the grantor’s taxable estate. As a result, they typically receive a full step-up in basis at death, which aids in estate tax reduction while allowing for probate avoidance and smoother administration. Trusts and inheritance through revocable trusts are a common way to:
- Maintain control during life
- Ensure a step-up in basis
- Provide privacy and continuity after death
3. Marital Planning and the Double Step-Up - For married couples, proper structuring of asset ownership can be critical in legacy planning. In community property states, both halves of community property generally receive a full step-up at the first spouse’s death. In non-community property states, effective estate tax reduction techniques — including properly drafted trusts — can help ensure:
Assets are included in the estate of the first spouse to die,
The surviving spouse and heirs receive maximum basis adjustment.
This strategy is sometimes referred to as a “double step-up.”
4. Strategic Use of Trusts - Certain irrevocable trusts can be designed so that assets are included in a person’s estate for income tax purposes (thus qualifying for a step-up), while still achieving non-tax goals such as:
Asset protection,
Control over distribution,
Creditor protection for heirs.
This requires careful drafting, but when done correctly, it can be a powerful tool in trusts and inheritance planning.
5. Avoiding Over-Aggressive Gifting - While gifting can reduce estate taxes, it often increases income taxes for heirs due to the loss of a step-up in basis. With today’s historically high federal estate tax exemption, many families benefit more from income tax planning than estate tax avoidance. A well-designed estate plan balances:
Estate tax exposure,
Capital gains consequences,
Family and control considerations.
Real-World Example: Family Home or Rental Property
Scenario: A couple purchased a rental property in the 1980s for $120,000. Over the years, they took depreciation deductions and never refinanced or sold the property. By the time the surviving spouse dies, the property is worth $900,000.
Original purchase price: $120,000
Adjusted basis after depreciation: $60,000
Fair market value at death: $900,000
Without a step-up in basis:
If the property had been gifted to a child during life, the child would inherit the low basis. If sold, the child could owe capital gains tax on roughly $840,000, plus depreciation recapture, which can complicate estate tax reduction strategies.
With proper estate planning:
Because the property was held until death and included in the estate, the child inherits the property with a new basis of $900,000. If the child sells shortly after inheriting, there may be little or no capital gains tax at all. This single planning decision can easily save six figures in taxes and is a crucial aspect of effective legacy planning.
Why the Step-Up in Basis Is Especially Important for Real Estate - Real estate is often the most appreciated asset in an estate, particularly when it has been held for many years. The step-up in basis can:
- Eliminate capital gains tax on decades of appreciation
- Eliminate depreciation recapture for heirs
- Make it easier to sell inherited property
- Preserve wealth for the next generation through trusts and inheritance
This is why gifting real estate during life — while sometimes appropriate — must be approached carefully.
Real-World Example: Vacation Home Passed Through a Trust
Scenario: Parents own a vacation home purchased for $200,000 that is now worth $1.2 million. They place the property into a revocable living trust for probate avoidance and effective legacy planning. Because the trust is revocable, the property is still considered part of the parents’ taxable estate, which can impact estate tax reduction strategies.
Result: When the second parent dies:
- The trust assets receive a full step-up in basis.
- The children inherit the property with a basis of $1.2 million.
- If the children later sell the home, capital gains tax is dramatically reduced or eliminated.
The revocable trust allows the family to achieve probate avoidance while preserving the benefits associated with trusts and inheritance, ultimately aiding in their estate tax reduction efforts.
Real-World Example: Family Business with Low Basis
Scenario: A parent starts a small manufacturing business decades ago with a minimal initial investment. Over time, the business grows and is now worth $3 million. The parent considers gifting the business to a child during life as part of their legacy planning.
Lifetime Gift Consequence: If the business is gifted:
The child inherits the parent’s original low basis, which can complicate estate tax reduction strategies.
A future sale could trigger massive capital gains tax.
Estate Planning Alternative: If the business interest is held until death:
The child inherits the business with a stepped-up basis equal to its fair market value, potentially aiding in trusts and inheritance considerations.
If the business is sold shortly after inheritance, capital gains tax may be minimal or eliminated.
For family-owned businesses, this can be the difference between:
Selling the business intact without incurring hefty taxes.
Being forced to sell assets or take on debt to pay taxes.
Using Trusts to Balance Control and Tax Efficiency
Certain trust structures can play a crucial role in legacy planning by preserving a step-up in basis while still addressing important concerns such as:
- Keeping a business in the family
- Protecting assets from creditors or divorce
- Controlling how and when heirs receive distributions
For instance, a trust can be crafted so that:
- The asset is included in the grantor’s estate for tax purposes, aiding in estate tax reduction
- Heirs receive a step-up in basis
- Long-term family goals are still safeguarded
These strategies necessitate careful drafting, but they are often ideal for real estate portfolios and family businesses.
Married Couples and the “Double Step-Up” Opportunity
For married couples, understanding asset ownership and trust planning can significantly impact tax outcomes and aid in effective estate tax reduction.
Example:
A married couple owns rental properties jointly. With proper planning:
- Assets may be included in the estate of the first spouse to die
- A step-up in basis may occur at the first death
- A second step-up may occur at the surviving spouse’s death
This can be particularly powerful for couples with highly appreciated real estate acquired early in their marriage, ensuring a more favorable legacy planning outcome.
The Step-Up in Basis vs. Estate Tax Considerations vs. Gifting: A Common Planning Mistake
For most Americans, federal estate tax is not a significant concern due to the current exemption levels. However, capital gains taxes can greatly diminish inherited wealth if basis planning is overlooked. Estate planning today goes beyond just estate tax reduction; it focuses on maximizing after-tax wealth for heirs through effective legacy planning.
Many people believe that gifting assets during one's lifetime is always more advantageous for tax purposes. In reality, for families below the federal estate tax threshold, income tax planning often takes precedence over estate tax planning.
Gifting:
- Reduces estate size
- Transfers low basis
- Can increase capital gains taxes for heirs
Holding assets until death:
- Preserves the step-up in basis
- Often results in a lower overall tax burden
The optimal strategy depends on the specific assets involved, particularly when considering trusts and inheritance.
Why Professional Estate Planning Matters
The step-up in basis is a powerful tool for estate tax reduction, but it is not automatic in every situation. Poorly structured plans, improper titling, or well-intentioned lifetime gifts can inadvertently eliminate this beneficial aspect.
An experienced estate planning attorney can:
- Review asset ownership and basis
- Coordinate trusts and beneficiary designations
- Align estate planning and income tax strategies
- Avoid costly and irreversible mistakes
Final Thoughts - The step-up in basis is one of the most valuable tax benefits available at death, playing a central role in legacy planning. With thoughtful planning, families can significantly reduce capital gains taxes and preserve wealth for future generations. Estate planning is not just about who gets what — it’s about how much they actually keep, especially through effective management of trusts and inheritance.
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🥃 Revocable & Irrevocable Trusts, Straight Up
🥃 Revocable & Irrevocable Trusts, Straight Up
🥃 Revocable & Irrevocable Trusts, Straight Up
Learn the difference between estate tax reduction strategies, when to use each, and how effective legacy planning, including trusts and inheritance, can keep your estate smooth and drama-free.
🍸 Estate Tax Reduction Cocktails
🥃 Revocable & Irrevocable Trusts, Straight Up
🥃 Revocable & Irrevocable Trusts, Straight Up
Mix up strategies for estate tax reduction that minimize what goes to Uncle Sam and enhance the benefits your loved ones receive through effective legacy planning, including the use of trusts and inheritance.
🍹 The Trust Flight Sampler
🥃 Revocable & Irrevocable Trusts, Straight Up
🍹 The Trust Flight Sampler
Explore options such as: Charitable Remainder Trusts, Special Needs Trusts, Life Insurance Trusts, and Dynasty Trusts, all of which play a crucial role in legacy planning and can aid in estate tax reduction, especially when considering trusts and inheritance. And of course, don’t forget the tasting notes!
🧾 BARTENDER’S PICKS: EXPERT ADVICE
We serve curated tips and trusted legal ingredients to help you build the perfect estate cocktail—strong, balanced, and built to last, all while considering estate tax reduction strategies.
Trust Fund Tavern isn’t just a place to learn about legacy planning; it’s where planning for trusts and inheritance becomes approachable, a little irreverent, and a lot less intimidating.
So stay for a sip (or a session) and leave knowing your future—and your family—is in good hands.
How He Protected His Fortune, Reduced Taxes, and Secured His Legacy
07/21/25 - Big Beautiful Bill wasn’t just rich—he was smart. With $15 million in assets and growing concerns about estate tax reduction and family confusion after he passed, he decided to completely upgrade his estate plan for better legacy planning. Here’s what he changed—and why it mattered, especially in terms of trusts and inheritance.
