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So many terms about planning, Let’s look at the difference between estate planning and financial planning. This should help clear up confusion on the subject. When it comes to planning out your finances, people are confused about the difference between an estate attorney vs. financial planner. Oftentimes, people use these terms interchangeably, but these professions serve different interests and goals.
Financial planning tends to focus on the accumulation and preservation of wealth. It often encompasses such things as:
• Clarifying Financial Objectives,
• Education Funding,
• Retirement Funding,
• Cash Flow Budgeting,
• Risk Management,
• Asset Protection, and
• Balance Sheet, Income Statements, and other financial measures.
Estate planning, on the other hand tends to focus less on accumulation and more on the protection and ultimate distribution of your assets, accompanied by specific instructions. Both financial and estate planning are ongoing processes—not events. It is inaccurate to say, “I did my financial plan” or “I did my estate plan.” Nothing in life is more certain than change.
Estate Planning or Financial Planning – Which Do I Need?
When it comes to estate planning or financial planning, the two areas are quite different and serve different goals. While the goal of a financial planner is to help you accumulate wealth, the goal of an estate planning attorney is to utilize various estate planning tools to help you preserve and distribute your wealth after your death.
Estate planning may touch on some of the same areas as financial planning (Ex: asset protection or tax planning), but estate planning also includes planning for the distribution of assets upon your death, minimizing estate taxes, protecting your heirs, and documenting your healthcare decisions. Typically, a financial planner cannot give you legal advice or draft the required legal documents necessary for an effective estate plan, which is why it’s important to also consult with an estate planning attorney.Depending on what type of professional you’re talking to, you may hear financial planning described as part of estate planning, or you may hear that estate planning is a sub-set of financial planning. Nevertheless, both types of planning are crucial, and must be integrated to achieve the best results for you and your family.
FAQs
Estate planning dictates how a person's assets get distributed after they pass away. In contrast, financial planning focuses on strategies for managing and growing wealth during a person's lifetime. Together, they can protect a person's assets — while alive and after they pass.
Is estate planning the same as financial planning? ›
While the goal of a financial planner is to help you accumulate wealth, the goal of an estate planning attorney is to utilize various estate planning tools to help you preserve and distribute your wealth after your death.
What is the best definition of estate planning? ›
Estate planning involves determining how an individual's assets will be preserved, managed, and distributed after death. It also takes into account the management of an individual's properties and financial obligations in the event that they become incapacitated.
What are the two components of estate planning? ›
There are six important components to an estate plan.
- THE WILL. The first and well-known component of an estate plan is a will. ...
- TRUSTS. ...
- POWER OF ATTORNEY. ...
- HEALTH CARE DIRECTIVE. ...
- BENEFICIARY DESIGNATIONS. ...
- REGULAR REVIEW AND REVISION.
Get a head-start on planning and follow these 7 easy steps:
- Take Inventory of Your Estate. First, narrow down what belongs to you. ...
- Set a Will in Place. ...
- Form a Trust. ...
- Consider Your Healthcare Options. ...
- Opt for Life Insurance. ...
- Store All Important Documents in One Place. ...
- Hire an Attorney from Angermeier & Rogers.
Traditionally, the process of planning for the transfer of assets to your loved ones after your death is known as estate planning. You might also hear another term: legacy planning.
Is financial planning only for the rich? ›
Financial wellness is for everyone
They can assist with taxes, retirement planning, windfalls, investments, estate planning, life insurance, debt payoff or general money management. There are even AI and algorithm-driven advisors available for the tech-savvy, such as robo-advisors.
What are the three goals of estate planning? ›
Q: What are the three main goals of an estate plan? A: The primary objectives are ensuring your assets are distributed as you wish, delegating decision-making authority if you're incapacitated, and clearly defining your beneficiaries to prevent legal or familial disputes.
What are the two key documents used to prepare an estate plan? ›
Key Takeaways
Common estate planning documents are wills, trusts, powers of attorney, and living wills.
What is the difference between a will and an estate? ›
While a will is a single tool, an estate plan involves multiple tools. Some common inclusions are wills, powers of attorney, advance directives, trusts and more. Estate plans can involve both durable power of attorney for your finances and healthcare power of attorney for medical decisions if you're incapacitated.
Most relatively simple estates (cash, publicly traded securities, small amounts of other easily valued assets, and no special deductions or elections, or jointly held property) do not require the filing of an estate tax return.
What is the difference between a trust and an estate plan? ›
While an Estate is merely the total value of a person's assets after they pass away, a Trust is a legal entity designed to hold, manage and distribute assets on behalf of beneficiaries. One is the assets themselves and the other is a legal entity designed to hold and distribute them.
What is the difference between estate plan and succession plan? ›
Estate Plan = Ownership of the business is left to heirs. Succession Plan = Management of business will be taken over by heirs.
What is the difference between wealth management and estate planning? ›
Wealth management focuses on growing and preserving assets through investment strategies, tax planning and risk management. Estate planning, on the other hand, ensures that your wealth is distributed according to your wishes after your passing, while also minimizing taxes and legal complications for your heirs.
What is the difference between financial plan and financial planning? ›
Financial planning is the process of assessing the current financial situation of a business to identify future financial goals and how to achieve them. The financial plan itself is a document that serves as a roadmap for a company's financial growth.
What is the difference between wealth planning and financial planning? ›
Financial planning deals with day to day aspects of planning your cash, while wealth management deals with preservation and increase of wealth. Here, cash is not the constraint. Assets like land, property, business corporate offices, high-end furniture, etc. are taken into consideration.
