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What is the Difference between Financial Planning and Estate Planning?

elenasimmons June 25, 2021

The tasks involved in financial planning and estate planning do get mixed up often as both financial planners and estate planners provide a lot of valuable services to those that want to plan for the future and organize their financial assets.

One of the most prominent differences between financial planning and estate planning is that financial planning is usually done by a financial planner while estate planning is handled by an estate planning attorney. Also, estate planning goes beyond financial elements. It includes determining who is allowed to make important decisions on your behalf and who is responsible for other duties to be carried out in your absence.

Financial Planning

In financial planning, an individual’s financial goals, including a review of business investments and investment accounts, are assessed. The overall aim is to provide a means of financial freedom and reach business or personal financial goals. A client meets with a financial planner to discuss and make decisions about how current assets should be used to meet future financial objectives.

Financial planning takes various forms like planning for retirement – deciding whether to use an IRA account or a 401k, or saving to invest in real estate, stocks, or bonds. An assessment of the financial health of a client is done to recommend investments and products, and to determine the appropriate strategies to be implemented to help reach their financial objectives.

Estate Planning

An estate planning attorney handles tasks related to estate planning. They alone are allowed to do this since financial planners cannot provide legal advice or draft legal documents. Financial planners and advisors therefore rather refer clients to estate planning attorneys once their needs cross into the area of estate planning and legal work.

If you are serious about protecting and growing your financial assets, then you need to see an estate planner in addition to a financial planner. Estate planners help you to organize your assets properly, ensuring that they are protected while you are alive and also after you are incapacitated or deceased by fulfilling the contents of your will and ensuring the proper distribution of your assets to beneficiaries as stated.

Why you should make adequate financial planning and estate planning early.

In circumstances where individuals with considerable wealth and assets failed to consider financial planning and estate planning before their deaths, the consequences have been dire as those they left behind would end up fighting over what they believe they deserve or what they believe they are owed. The absence of a will could cause a lot of problems. Without proper planning, the result would be an expensive battle among potential beneficiaries. However, a will usually reduces the problems that could come without it.

So, which is more important?

With the above differences and tasks involved in financial planning and estate planning, it is evident that neither is more important than the other. They are both important for different reasons, so you need to speak with the right person about your goals. A financial planner cannot handle the demands of legal work and an estate plan. Neither can an estate planning attorney offer financial planning services. In most cases, for a comprehensive plan, financial planning and estate planning work well together.

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