Dunning-Kruger Effect in Estate Planning: Why Overconfidence Can Lead to Costly Mistakes

What is the Dunning-Kruger Effect?

Have you ever felt confident after learning something new, only to realize later just how much you still don’t know?

This phenomenon is the Dunning-Kruger Effect—it describes the bias where we overestimate our abilities due to a lack of deeper knowledge, only to later realize how much we didn’t understand. Think about your skills in your career, playing a sport, or learning a new hobby. Initial overconfidence is a common human bias we all tend to have.

How the Dunning-Kruger Effect Impacts Estate Planning

As estate and Medicaid planning attorneys, we see this often with clients, potential clients, and even family and friends. We often see that most people think their legal needs are simple, and that they just need a little advice, if any at all. And we know, it is much more complicated.

A Common Example: Minnesota’s Statutory Short Form Power of Attorney

A good example is Minnesota’s Statutory Short Form Power of Attorney form. There are about eight required fill-in-the-blanks and a few checkboxes on this standard form, yet over 90% of DIY versions we see have errors. Some of these errors have created devastating legal realities for those who signed them. This isn’t because the people who filled them out weren’t intelligent—they just didn’t know the nuances to look out for. We often see similar problems with DIY Health Care Directives.

The Hidden Dangers of DIY Estate Planning

Incorrect incapacity documents, like a Power of Attorney, are certainly a danger to avoid, but the Dunning-Kruger Effect can also bite in planning for your estate. The issue is that it’s unlikely estate planning mistakes will be discovered until those documents need to be used—after you are gone. And then, it is too late to change them.

Overconfidence Can Lead to Oversimplification

Medicaid (or Medical Assistance in Minnesota) planning is a notoriously complex and unintuitive area of law. We regularly see significant errors that can cost tens of thousands of dollars or much more, as well as causing stress, hassle, and reduced quality of care.

Avoiding Costly Oversights in Estate Planning

The message here is this—you don’t know what you don’t know, and in these areas of law, overconfidence in DIY estate planning and oversimplification can harm not just you but your loved ones who are left with a mess. The proper way through this is a collaborative approach with an experienced estate and elder law firm providing real expertise.

Collaborative Estate Planning with Experienced Professionals

A little knowledge can be empowering, but the Dunning-Kruger Effect can create a false sense of security that overlooks crucial details. At Safe Harbor Estate Law, we’re here to fill those gaps and ensure your plan properly and thoroughly protects you as much as possible. Let’s work together to create an estate plan that goes beyond the basics and offers you true peace of mind.