Differences Between Financial Planning and Estate Planning

By K. Bridget Schneider, CFP®, CRPC®

Differences Between Financial Planning and Estate Planning

Do you need a financial planner or an estate planner?  Is there is a difference between them?  Although they sound similar, they do have specific areas of expertise.  Let’s go over the differences between financial planning and estate planning and answer some questions you may have.

Financial Planning

Financial planning generally focuses on the accumulation and preservation of wealth.  A financial plan should clarify your goals and provide a road map to help you achieve them.  It may encompass things such as:

Your plan should be monitored over time to keep you on the path toward achieving your goals.  However, a good financial plan should also consider unexpected events that may come your way.  In addition to reviewing your plan on a regular basis and modifying it as needed, it should include planning for the distribution of your wealth when you die.  This is more commonly known as estate planning. 

Estate Planning

Almost everyone has an estate.  It is comprised of everything you own— your car, home, other real estate, checking and savings accounts, investments, life insurance, furniture, and personal possessions.  Estate planning involves deciding and naming in advance who will receive the things you own after you die rather than letting the state decide how it will be distributed.

Good estate planning should also:

  • Include instructions for your care if you become disabled before you die.
  • Name a guardian for any minor children.
  • Provide for family members with special needs without disrupting their current benefits.
  • Provide for loved ones who might be irresponsible with money or who may need future protection from creditors or divorce.
  • Give specific directions for the transfer or sale of your business at your retirement, disability, or death.
  • Dictate how your digital assets will be handled.
  • Minimize taxes, court costs, and unnecessary legal fees.
  • Include life insurance to provide for your family at your death, disability income insurance to replace your income if you cannot work due to illness or injury, and long-term care insurance to help pay for your care in case of an extended illness or injury.

Some of this can be tackled with your Certified Financial Planner professional.  However, some items, such as drafting legal documents, will require the services of an estate planning attorney.  Just like financial planning, estate planning is an ongoing process, not a one-time event. Therefore, your legal documents should be reviewed and updated as your family and financial situations (and laws) change over time.

Summary

Estate planning and financial planning are both important—but for different reasons.  Ideally your financial planner, estate planning attorney, and tax advisor will work together to ensure that they are creating a comprehensive plan that will deliver the best outcome.  As your friendly financial guide and ally, we can help you make sense of your financial life including ideas on planning for the distribution of your estate.  For more information on estate planning or other areas of financial planning, visit our website today, click here to schedule an initial meeting or call us at 217-605-8130.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual, nor intended to be a substitute for specific individualized tax or legal advice. 

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