It is common for people to confuse the responsibilities of financial planners and estate planners. Both professionals offer substantial value to those interested in organizing their financial assets, planning for the future, and creating greater peace of mind and security. In actuality, however, financial planners and estate planners have important differences in their specific areas of expertise. The key distinction is that estate planning is typically directed by an estate planning attorney rather than a financial planner. Estate planning also includes elements beyond financial assets, including who can make health care decisions on your behalf, open your mail, care for your pets, etc.
Financial planning includes assessing a person’s current financial goals, including the review of investment accounts and business investments. A financial planner works with her client to make decisions about present assets to hopefully grant greater financial freedom and meet personal/business future financial goals. This type of planning may include saving to purchase real property, or planning for retirement, such as determining whether funds should be saved into a 401K versus an IRA account. Financial planners also assess clients’ overall financial health. An experienced financial planner helps clarify existing options and recommends products, investments, or other strategies to help one achieve her financial goals.
Estate planning, on the other hand, is handled exclusively by an estate planning attorney. While it is extremely common for financial planners, financial advisors and other financial professionals to recommend clients consult with an estate planning attorney, they cannot offer legal advice regarding how to prepare for possible incapacity, nor can they draft the required legal documents.
Many people incorrectly assume that a financial planner is the only professional they need to see when it comes to protecting financial assets. Estate Planning attorneys are necessary to ensure that one’s assets are properly organized and protected during lifetime, as well as to plan for incapacity and the proper distribution assets to beneficiaries following death. Failure to plan one’s estate can have dramatic and negative consequences. Horror stories abound of celebrities who have either failed to plan or inadequately planned their estates. The result is an expensive, drawn-out, emotionally-charged battle among potential heirs, all of which could have been avoided through proper planning.
A sophisticated and experienced estate planning attorney will look at every possible scenario and create a detailed estate plan that addresses what will happen should any of the scenarios occur. Good estate planning is about planning for as many “what if’s” as possible. It is only through creating a lasting document that includes the many variables that exist in life, that there can be greater assurance that one’s wishes can be met and his or her estate smoothly administered.
Estate planning and financial planning are both important—but for specific reasons. Speaking with the right person about one’s goals is imperative. An estate planning attorney will not be able to offer financial planning, and a financial planner will not be able to plan and draft an estate plan. With that being said, estate planning attorneys and financial planners work well together to ensure that they are creating comprehensive plans that will deliver the best outcome for their mutual clients.