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Is a Financial Plan Enough?

Everyone wants to leave a financial legacy for their family.  If you only have a financial plan, then you’re trying to guide a boat with only one oar.

A financial plan is only part of the puzzle for your overall monetary health.  Your financial plan should work in tandem with a solid estate plan to create the best possible future for you and your family.

So what’s included in a financial plan?

Financial planners take stock of an individual’s fiscal landscape and come up with approaches to maximize his or her overall financial well-being.

Let’s take Emily for instance, an energetic project manager in her late-twenties. She’s found a successful career track after graduating college and now has the steady income necessary to start daydreaming about buying a house with bay windows like the one she passes on her morning commute.

But before she can take such a big leap, Emily tracks down a skilled financial planner who will take an honest look at her foreseeable cash flow and her spending and saving habits. People from all walks of life use the help of financial planners to make sure they’re in good shape for making big purchases, saving for their children’s education, and ensuring a comfortable retirement. This also includes developing an investment portfolio, which the financial planner monitors and manages.

But financial planning only goes so far. To have a comprehensive approach, Emily also must also consider her estate and the wills and trusts she should put in place so her assets go where she wants them to in the long run. That’s where estate planning comes in.

So what’s included in an estate plan?

Estate planning determines what will happen to a person’s assets if he or she becomes mentally incapacitated or when he or she dies. While this may not sound like the sunniest of topics, knowing that what you pass on to your family will be legally protected lets you focus on enjoying the best things in life without worrying about your loved ones’ futures.

Estate planning includes defining how you want your loved ones to benefit from the financial legacy you leave behind, implementing tactics to protect your assets from creditors down the road, providing a framework so your loved ones can make medical decisions on your behalf when you can’t, developing strategies to help you reduce estate taxes, and more.

And at the end of the day, an estate planning attorney can act as a teacher. He or she should be equipped to clearly explain your legal options. Even though estate planning can be highly technical, your professional bond with your attorney can and should feel like a friendly partnership since it involves taking an honest look at many personal wishes and priorities. There is no one-size-fits-all estate plan, so choose an attorney whom you trust and enjoy working with and who is responsive to questions and needs.

Remember Emily? While financial planning helped her get from point A to point B with some pretty big money milestones, she now knows she needs an estate planning attorney to make sure her wishes are carried out and her money stays in the right hands—her family’s.

How these two efforts work together

There are several ways these two components of your financial wellness work in harmony. Asking your financial planner and estate planning attorney to collaborate is common practice, so don’t be concerned that what you’re asking is outside their regular scope of work. Knowing who else advises you will help both parties get the information they need do their jobs at peak effectiveness. For example, your estate planning attorney may prepare a revocable living trust for you, but your financial planner may help you transfer certain assets into that trust.

What are you waiting for?

If you already have a financial planner and are thinking about working with an estate planning attorney, you’re in an excellent position. Estate planning attorneys routinely work with advisors work together. This might save you time and money, as we’ll get up to speed with the help of your financial planner.

The right time to plan your estate is right now. The sooner you put yourself and your family in a position to rest easy knowing a solid plan is in place, the better. And now that you know your financial plan is a wonderful start—but not a complete solution—you’re ready to take the first step on the path to total financial security.

Something else to consider

After you have a financial and estate plan in place, you should also consider creating a Wealth Transfer Plan, which is a series actions taken to prepare your family for their inheritance, help keep family harmony and help your family makes sound decisions about their inheritance. A sound plan involves:

  • Communicating your money values and family goals
  • Sharing intentions as to heirs and time frames of transfers.
  • Introducing family members to your advisors (financial planner, estate planning attorney, accountant) so they know who they will be working with.
  • Create an understanding by the heirs of the family assets and encourage a strong foundation of investing so they are prepared when the time comes.
  • Encourage family members to establish their own financial and estate plan so they are better prepared to accept and inheritance.