The Overlap Between Estate Planning and Financial Planning

The Overlap between Estate Planning and Financial Planning

By: Barry E. Haimo, Esq.

November 3, 2014

Estate planning aims to ensure your affairs are in order during life and after death. It focuses on five things: i) appoint fiduciaries to stand in your shoes when necessary; ii) appoint a guardian or guardians of minor children; iii) designate your beneficiaries; iv) avoid probate and guardianship; and v) minimize estate and gift taxes. In contrast, financial planning means making sure that you are intelligently and systematically saving and investing your money. Both kinds of planning are methods for protecting you and your loved ones in the future, but that’s not where the overlap between them ends.

What You Get Out of Estate Planning

Saying that estate planning “gets your house in order” sounds nice, but it’s kind of vague when you’re talking about the specifics involved due to someone’s death or incapacity. Here’s what a sound estate plan actually accomplishes for you, you family and your business.

  • Enables you to appoint fiduciaries
  • Enables you to designate beneficiaries
  • Describes the kind and degree of medical help you want to receive – and not to receieve
  • Addresses posthumous issues, including:
  1. Specifics relating to your funeral services
  2. How and where you want to be buried, if at all
  3. From where the money for these expenses should originate
  • Defines incapacity and when someone should take over handling your affairs for you
  • Sets up trusts and other accounts to protect assets for you and your loved ones and to sidestep probate, guardianship and other time-consuming processes
  • Designates how you will be taken care of if you are incapacitated
  1. Who will do it
  2. From where will the money come
  3. How will you be cared for during life if you’re unable to care for yourself
  • Gives you the opportunity to explain and humanize your decisions to your loved ones by preparing a testamentary letter of intent or making a legacy video
  • Saves your family from the emotional anguish of guardianship and administering your estate
  • Saves your family from the emotional anguish of having to make all of these decisions themselves and trying to determine what you would have wanted

How Financial Planning Can Help You

As important as estate planning is, it’s benefits will not be maximized if you haven’t been engaged in financial planning throughout your life. While estate planning creates a flexible plan for various contingencies during and after your passing, financial planning focuses on two things: i) making smart financial decisions during your life to ensure you have money for the rest of your life; and ii) making sure there’s enough left to leave to you family. Most people have some idea of what’s involved in financial planning, but far too many possess only a basic understanding. Here are just a few financial planning vehicles in which to talk to a professional.

  • Investing in the market (stocks, bonds, mutual funds)
  • Utilizing exchange traded funds (ETFs), which are slices of sectors of markets
  • Acquiring term and/or permanent life insurance for asset protection, investment and security
  • Obtaining annuities for income streams
  • Purchasing long-term care insurance to ensure your end of life needs don’t fatally erode your estate
  • Paying for disability insurance in case you are unable to earn an income for your family

Each of these vehicles have advantages and disadvantages. Determining which of these them is appropriate for your needs, risk tolerance and your financial situation will undoubtedly require a combination of these tools. Two of the most flexible vehicles available are life insurance and annuities because both are exempt from creditors and have an internal investment component that often generally exceeds what’s available in the marketplace.

That being said, which vehicles are “best” isn’t a question that can be easily answered on an individual basis. That’s why you want to find and work with a professional or team of professionals with whom you feel comfortable. Each vehicle mentioned above has benefits that can’t be overlooked, but that doesn’t mean it’s appropriate for you. Experienced professionals will be able to help you put your money in the place that makes the most sense for your risk tolerance and circumstances so that your family’s affairs are in good order both now and moving forward.


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