The intention: "Let's add our daughter to the deed so she doesn't have to deal with probate when we're gone."

The consequence: When you inherit property at death, you generally receive a stepped-up basis — the home's value resets to its current market value, so the family owes no capital gains tax on decades of appreciation.¹ But when a parent adds a child to the deed during their lifetime, the IRS treats it as a gift. The child receives the parent's original cost basis instead.¹

For example, say a parent adds their child to a home originally purchased for $40,000 that's now worth $450,000. The child could inherit the $40,000 basis — and face capital gains taxes on $410,000.² The IRS may also treat the transfer as a taxable gift.³ And joint ownership can expose the home to the child's creditors.⁴

A different approach: Passing property through a will or trust generally preserves the step-up in basis — which means the family may avoid the capital gains tax entirely.

The intention: "I named my beneficiaries when I opened the account. That's handled."

The consequence: Beneficiary designations are a commonly overlooked part of an estate plan. Many Americans have never revisited theirs — even after getting married, divorced, or having children. And here's the part many people don't realize: beneficiary forms on retirement accounts and life insurance don't follow your will. In most cases, they supersede it.⁵

That means an ex-spouse, a deceased relative, or simply "the estate" could receive your assets — regardless of what your will says. With $16.2 trillion sitting in IRAs alone, the stakes of a forgotten form are enormous.⁶

A different approach: Review beneficiary designations after every major life event. Confirm they align with your current will and overall estate plan — not just with what made sense when you first filled them out.

The intention: "We set up a trust. We're covered."

The consequence: A trust only controls assets that have been retitled into it — a process called "trust funding." If you create a trust but never transfer your home, bank accounts, or investment accounts into the trust's name, those assets may still pass through probate.⁷

The trust exists on paper. But it doesn't own anything. So when it's time for the trust to do its job, it can't.

A different approach: After creating a trust, work with your attorney to confirm that your major assets are actually titled in the trust's name. The document alone isn't enough — the funding is what makes it work.