Are You Making These 5 Costly Estate Planning Mistakes? What Every NJ Real Estate Attorney Wishes Their Clients Knew About Inherited Property

Oct 22

When it comes to inherited property in New Jersey, small mistakes can cost your family thousands: or even hundreds of thousands: of dollars. As real estate attorneys, we see the same devastating errors over and over again. Families lose homes to unnecessary taxes, properties get stuck in probate for years, and loved ones end up fighting in court over assets that should have passed smoothly to the next generation.

The good news? These mistakes are completely preventable when you know what to watch for.

Mistake #1: Assuming You Don't Need an Estate Plan (Yet)

Here's the reality check: if you own property in New Jersey, you need an estate plan. Period.

"But I'm only 35 and healthy!" "My house is just a starter home!" "I don't have enough assets to worry about!" We hear these excuses constantly, and they're all wrong.

Without a will or trust, your property will be distributed according to New Jersey's intestate succession laws: not your wishes. Your spouse might only get a portion of your home instead of inheriting it outright. Your children could become co-owners of the family house before they're financially mature enough to handle that responsibility.

Even worse, your property will likely go through probate court, a public process that can take 6-18 months and cost thousands in legal fees, court costs, and appraisal expenses. During this time, your family can't sell the property, refinance it, or make major repairs without court approval.

The attorney's perspective: We regularly see families who have to take out loans just to pay property taxes and maintenance costs on inherited homes stuck in probate. Don't let this be your legacy.

Mistake #2: Forgetting About Joint Ownership and Beneficiary Designations

This might be the most expensive oversight we encounter. Many people assume their will controls everything, but jointly owned property and accounts with beneficiary designations pass outside of your will entirely.

Consider this common scenario: You remarry later in life and want to leave your house to all your children equally. But years ago, you added your current spouse as a joint owner for convenience. When you die, your spouse automatically inherits the entire property: regardless of what your will says. Your children from your first marriage get nothing.

Or maybe you bought rental property with your brother 20 years ago as joint tenants with right of survivorship. You intended to leave your half to your kids, but when you die, your brother automatically becomes the sole owner. Your family loses a valuable asset forever.

Other problematic situations we see regularly:

Outdated beneficiaries on life insurance policies (ex-spouses are common)
Bank accounts with old joint owners or beneficiaries
Investment accounts that haven't been updated after divorce or family changes
Real estate titled incorrectly for your current estate planning goals

The attorney's fix: Review all your property deeds, account statements, and beneficiary designations annually. Make sure they align with your overall estate plan, not fight against it.

Mistake #3: Ignoring New Jersey's Inheritance Tax Trap

New Jersey eliminated its estate tax in 2018, but kept its inheritance tax: and this distinction trips up almost everyone.

Here's what many people don't realize: the inheritance tax isn't based on the size of your estate. It's based on who inherits your property. Leave your beach house to your daughter? No tax. Leave the same property to your nephew? He could owe 11-16% of its value in inheritance taxes.

New Jersey's inheritance tax rates by relationship:

Class A beneficiaries (spouse, children, parents, step-children): 0% tax
Class C beneficiaries (siblings, sons/daughters-in-law): 11-16% tax
Class D beneficiaries (everyone else, including step-grandchildren): 15-16% tax

We've seen heirs forced to sell inherited properties just to pay the tax bill. Imagine inheriting a $500,000 rental property but owing $80,000 in inheritance taxes due within eight months of the death.

The attorney's strategy: If you want to leave property to Class C or D beneficiaries, consider gifting strategies during your lifetime, life insurance to cover taxes, or trust structures that can minimize the tax burden.

Mistake #4: Set It and Forget It Estate Planning

Your estate plan isn't a "set it and forget it" document. Life changes, and your plan needs to change with it.

Major life events that require estate plan updates:

Marriage or divorce (yours or your children's)
Birth or adoption of children or grandchildren
Death of named beneficiaries or executors
Significant changes in your financial situation
Moving to or buying property in another state
Starting or selling a business

Here's a real example from our practice: A client created a will in 2010 leaving his house to his three children equally. By 2024, he owned four rental properties and his primary residence. His daughter had died, leaving three young children. His son had gotten divorced and remarried.

His outdated will would have created chaos: unclear distribution of the rental properties, the deceased daughter's share potentially going to her young children without proper trust protection, and no consideration of his son's blended family situation.

The attorney's recommendation: Review your estate plan every 3-5 years or after any major life change. Update beneficiaries, executors, and asset descriptions to reflect your current situation.

Mistake #5: The DIY Estate Planning Disaster

Online estate planning tools and template wills seem like a great way to save money. But when real estate is involved, DIY planning often costs far more than it saves.

Common DIY mistakes that destroy property transfers:

Vague property descriptions that don't match deed records
Failure to account for mortgages and how they'll be handled
No consideration of what happens if beneficiaries predecease you
Improper execution (witness requirements, notarization issues)
Conflicting instructions between wills and property titles

We've seen DIY wills that accidentally disinherited intended beneficiaries, created ambiguous language leading to family lawsuits, and failed to properly address tax planning opportunities that could have saved tens of thousands of dollars.

One particularly devastating case involved a DIY will that left "my house" to the deceased's daughter. The problem? He owned three properties, and the will didn't specify which one. The family spent $40,000 in legal fees fighting over the interpretation.

What real estate attorneys wish you knew: Estate planning isn't just about distributing assets: it's about protecting your family from taxes, probate delays, and conflicts. The cost of proper legal guidance is minimal compared to the disasters we clean up from DIY planning gone wrong.

Beyond the Big Five: Additional Property Protection Strategies

Smart property owners also plan for these scenarios:

Long-term care protection: Nursing home costs average $12,000+ per month in New Jersey. Without proper Medicaid planning, your family home could be lost to pay for care.

Digital assets: Don't forget online accounts related to your properties: property management software, online banking for rental income, digital documents stored in the cloud.

Business property: If you own rental properties or commercial real estate, you need additional planning for business succession and tax optimization.

Your Next Steps

Estate planning for property owners isn't optional: it's essential protection for your family's financial future. The mistakes we've outlined here happen to smart, successful people who simply didn't know what they didn't know.

If you recognize any of these mistakes in your current situation, don't panic. Most estate planning errors can be fixed with proper legal guidance and updated documents.

Ready to protect your property and your family? Let's start with a conversation about your specific situation. We'll review your current estate plan (or help you create one), identify potential problems, and give you a clear roadmap for protecting your real estate legacy.

Your family's financial security is worth more than the cost of getting this right the first time.

Ruma Mazumdar