Indeed, estate-planning blunders are costly and common, even among the fiscally prudent.  Any number of oversights can leave you vulnerable in the event you become incapacitated.  Others can seriously compromise the amount your heirs will inherit when you die.

For example, 'Bob' made the critical mistake of giving his girlfriend partial control of his assets during his lifetime.  Unbeknownst to him, she had promptly transferred ownership of a significant portion of his estate to herself.  Bob's will named his children as beneficiaries, but there was little left to distribute when he died.  Once it's discovered, it's usually too late if the assets are already spent or transferred out of jurisdiction.

If you wish to ensure that your estate does not fall prey to predators, creditors or taxes, keep reading to be sure you're not committing one or more of the five cardinal sins of estate planning.

1. Picking poorly

Many people forget that estate planning is a two-part process.  Half of the documents you draft provide instruction for divvying up your estate after you die, but the other, and potentially more important half, outlines directives for handling your finances and medical care if you become disabled.

Think long and hard about whom you select as your durable power of attorney and health care proxy.  Your life is literally in their hands.  One of the biggest mistakes that can occur is picking someone not trustworthy or qualified to act on your behalf.   You can put the best estate plan into place, but if you pick the wrong person to help execute it, it doesn't matter.

It's a mistake, for example, to pick your eldest child out of a sense of duty, when your youngest child may be more responsible or likely to make better decisions.  You should also consider proximity and be prepared to amend your powers of attorney as needed.   Maybe you picked the child you live closest to now, but they later move halfway across the country.  It's no longer reasonable to ask them to be your medical power of attorney.  Too many people create these documents one time and forget about them.

Remember, too, to ask permission before naming someone your power of attorney and health care proxy. The person you selected may not want the job or feel up to the task, and he or she certainly doesn't want to be surprised by the designation after you pass.

One final tip: Make sure you sign a Health Insurance Portability and Accountability Act release, which allows medical professionals to discuss your health with your designated representative.

2. Leaving your IRA to your estate

Do not name your estate as your individual retirement account beneficiary or it will be subject to claims and creditors during probate, the legal process for settling your estate.  When you die, your individual retirement account would be used to pay off any debts in your name.  Whatever money remains, if any, gets distributed to your heirs-and not in a timely fashion.  Probate is costly and can take years to complete.

If the deceased had bad credit card debt or is upside down on a loan, the entire IRA could be used up.  However, naming a live person-or all of your children equally-instead as the IRA beneficiary allows those assets to pass outside of probate free and clear, away from hungry creditors.

Another reason not to leave your IRA to your estate is that it denies your heirs the ability to let those assets grow.  How so?  Non-spouse heirs can normally either liquidate an inherited IRA and pay taxes within five years of the owner's death, or "stretch" their required minimum distributions-and tax bite-out over their lifetime.  The stretch option is far more valuable, since it enables the account to continue earning compounded interest for decades to come.  By failing to name a person as your beneficiary, your heirs lose that ability to stretch and must distribute the IRA assets within five years.

3. Forgetting to update beneficiaries

Another financial folly?  Failing to update your beneficiary forms after a divorce or death in the family. This is particularly critical where IRA beneficiaries are concerned. For example, if you update your will but forget to change the designated beneficiary to your IRA, the person named to your IRA is legally entitled to that asset when you die.  That could be your estranged ex, who can then leave that money to his or her own children from another marriage.  

Thus, it's important to review your designated beneficiaries on all documents (including retirement accounts and life insurance) after every life event and be sure they all reflect what's written in your will.   

People circumvent their own will all the time.  They'll indicate in their will that they want their assets divided equally among their three children, but then they go and name one child as the beneficiary to their IRA account and another to their house or a joint bank account.  For example, one client left jumbo certificates of deposit to each of his four sons but then forgot and spent down one of the CDs, leaving that beneficiary out in the cold.

If you plan to divide your estate equally among your kids, each beneficiary form for each of your accounts should indicate that the assets are to be divided equally among your children.

4. Failing to sign a health-care directive

Equally egregious, where estate planning is concerned, is failing to create an advance health care directive, also known as a living will.  This document lets your family, physicians and friends know what your end-of-life preferences are, as far as procedures such as surgery, organ donation and cardiopulmonary resuscitation are concerned.  In short, it's the piece of paper that tells them whether to pull the plug or not.

Such guidance spares your family the emotional angst of having to guess at your wishes when they are already under stress.  We are an aging society and with that comes the potential for loss of capacity and ability.  Without these documents, it's a much more complicated process and it opens the possibility that your family will disagree over what they believe your wishes are and who should be in charge.

That's doubly true if you remarried and your spouse and children are at odds, she said. Keep a copy of your signed and completed health-care directive safe and accessible to ensure that your wishes will be known and carried out at the critical moment.  Give a copy to your attorney or family members as well.

Many people file their paperwork in a safe deposit box, forgetting that the bank is not allowed to release the contents of that box to beneficiaries until probate is complete. By then, the funeral is over and assets divided according to state law.

5. Leaving a living trust unfunded

A living trust, which allows you to pass assets to heirs outside of probate, can be a valuable estate-planning tool.  But it won't do you a bit of good if you fail to put assets into the trust.  Once you set up a living trust, you must retitle your assets under the name of the trust.

There's a lot of misunderstanding with individuals when it comes to trusts.   Many people think that the schedules attached to the trust, which asks them to list the assets they will transfer, means they've actually transferred those assets.  That's not the case.  The schedule merely indicates which assets you intend to transfer.

You must still take steps to physically change the title of those assets under the name of the trust.  For real property, that involves changing the deed.  For assets such as stocks and bank accounts, the accounts must be retitled by the financial institutions where they are held.

And, of course, don't delay

This one's just a bonus, but certainly worth a mention.  Many people delay estate planning, partly because it's unpleasant to contemplate our own mortality, partly due to the expense, and partly because younger adults believe such paperwork isn't necessary until they reach old age.

Big mistake, especially if you have young children.  If you don't create an estate plan, you're letting the courts decide how to divide your assets, which may not reflect your wishes, particularly if you have children or specific distribution desires.   If you wish to donate to charity, for example, the courts aren't going to grant that unless it is specified in your will.  Without a road map, it just makes it much more difficult for everyone.   Postponing the process may also limit your ability to maximize the amount you leave to your heirs.   If you wait too long, some of the best planning opportunities may be gone.  For taxable estates, you could have gifted money or restructured assets.

The biggest estate-planning mistakes can be easily avoided with a few signed documents and some vigilance. Because of the complexity involved, however, it's vital that proper legal counseling be used.  This is one of those areas where it's even more expensive if you don't take care of it correctly.  

Dan knew he was going to inherit a fortune when his sickly father died.

He decided that he needed to be with his dream woman to really enjoy it.

One evening he was at a singles bar where he spotted the most attractive woman he had ever seen. Her natural beauty took his breath away.

"I may look like just an ordinary man," he said as he walked up to her, "but in just a month or two, my father will die, and I'll inherit 20 million dollars."     

Impressed, the woman went home with him that evening.

Three days later, she became his stepmother.

When it comes to Estate Planning, women are so much smarter than men.