The Intersection of Estate and Financial Planning

Sometimes the concept of financial planning is considered distinct from the more laborious and esoteric task of estate planning. The financial plan is the “low hanging fruit” that is usually first to be addressed. However, in many important respects, the two should be considered contemporaneously to establish a more robust, holistic plan. 

A brief review of each concept is helpful. Financial planning is generally the process and resultant plan that speaks to an individual (or couple’s) financial situation during life. It considers current income and assets, projections for future assets and income, current expenses, and projections for future expenses. It is a method to plan for major life events and financial decisions like retirement. By way of example, a couple in their 50’s may seek financial planning assistance to determine what steps they need to implement to be able to retire at their accustomed standard of living by age 62. The financial planner can model various market scenarios, investment returns, and life decisions. The financial planner can then add options and planning strategies and show the resultant effect on the financial plan. Finally, the financial planner can suggest strategies to implement and monitor the plan to help the couple pursue their goals. Financial planning is generally performed by licensed financial planners. 

Estate planning, by contrast, is generally the process of planning for the distribution of your wealth (whether you have $1 or a billion dollars) after your death and the process of planning for your incapacity while you are alive. The resulting documents might include wills or trusts or powers of attorney or health care directives. Estate planning is performed by licensed attorneys. 

Regrettably, it is rare that the financial planner and the attorney have the time or opportunity to discuss strategies together prior to either implementing a plan. The coordination adds to the cost, complexity and frankly, the hassle of establishing and modifying the plan at inception, and as variables change through the years. 

Nonetheless, the coordination between the attorney and the financial advisor is vital to producing the best overall outcome for the client. Examples help to illustrate this point.

Often, the estate planning attorney gathers information from a client regarding current asset information but does not extrapolate asset growth like a financial advisor. The attorney may see that, today, the clients don’t need any estate tax planning and therefore the attorney does not incorporate any estate tax avoidance mechanisms. 

 But, the financial advisor has separately modelled a taxable estate two years hence based on income and savings and market projections. The attorney should know that to start discussing estate tax avoidance techniques. 

Often, the financial advisor is less concerned with the client’s vision for the estate plan other than just the fact that the client has an estate plan. The financial advisor may not know that the client has decided (in consultation with the attorney) that 20% of the estate should go to charity upon the client’s death. The attorney simply drafts the vision into the estate plan. But, had the financial advisor recognized that part of the estate plan, he or she may have modelled additional (and potentially more powerful) giving techniques. For example, the financial advisor may have proposed a gift to a Charitable Remainder Trust that would hit three sweet spots for the client: (1) it would provide a stream of income back to the client for life (thus providing the security and income through retirement years); (2) it would provide an immediate tax deduction (which a gift at death does not do); and (3) it would accomplish the client’s goal of giving a sum to the charity at death. 

Other examples abound: a financial advisor may track out-of-state investment property and the attorney should know about those to place in trust or LLCs (as the case warrants); an attorney may quickly spot liability concerns that would cause a financial advisor to suggest increasing umbrella insurance coverage; a financial advisor may understand the source of client’s wealth (e.g. inheritance from the client’s father where father’s intent was to keep the inheritance both separate and ultimately for grandkids) and spark the attorney’s imagination to create an inter-vivos irrevocable trust for the client’s children that is protected from creditors; aligning beneficiary designations between the financial advisor (e.g. “to my children”) and the attorney-drafted estate plan (e.g. “to the trust for the benefit of my children.)

The point is that your attorney and your financial advisor should be talking and working in concert to produce tailored plans for you. Only by integrating the attorney side and the financial advisory side can the client have a truly holistic plan that represents their goals for their life and their goals for assets after passing. 


* Licensed, not practicing.

The opinions voiced in this material are for general information only and not intended to provide specific advice or recommendations for any individual or entity. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. 

Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through Cornerstone Wealth Strategies, Inc., a registered investment advisor and separate entity from LPL Financial.