By Beau Ruff

Sometimes the

concept of financial planning is considered distinct from the more laborious

and esoteric task of estate planning.

The financial plan

is the “low hanging fruit” that is first to be addressed. However, in many

important respects, the two should be considered contemporaneously to establish

a more robust, holistic plan.

A brief review of

each concept is helpful.

Financial planning

is the process and resultant plan that speaks to an individual or couple’s

financial situation during life.

Financial planning

considers current income and assets, projections for future assets and income,

current expenses and projections for future expenses. It is a method to plan

for major life events such as retirement.

By way of example,

a couple in their 50s may seek financial planning assistance to determine what

steps they need to implement to be able to retire at their accustomed standard

of living by age 62.

The financial

planner can model various market scenarios, investment returns and life

decisions, then add options and planning strategies to show the effect on the

financial plan.

Finally, the

financial planner can suggest strategies to implement and monitor the plan to

help the couple pursue their goals. Financial planning is generally performed

by licensed financial planners.

In contrast, estate

planning is the process of planning for the distribution of your assets after

your death and the process of planning for your incapacity while you are alive.

The resulting

documents might include wills, trusts or powers of attorney or health care

directives. Estate planning is performed by licensed attorneys.

Regrettably, it is

rare that the financial planner and the attorney have the time or opportunity

to discuss strategies together prior to either implementing a plan.

The coordination

adds to the cost, complexity and, frankly, the hassle of establishing and

modifying the plan at inception and as variables change through the years.

Nonetheless, the

coordination between the attorney and the financial advisor is vital to

producing the best overall outcome for the client.

Examples help to

illustrate this point.

Often, the estate

planning attorney gathers information from a client regarding current asset

information but does not extrapolate asset growth like a financial advisor. The

attorney may see that, today, the clients don’t need any estate tax planning

and therefore the attorney does not incorporate any estate tax avoidance mechanisms.

However, the

financial advisor has modeled a taxable estate based on income and savings and

market projections. The attorney should be aware of that to start discussing

estate tax avoidance techniques.

Often, the

financial advisor is less concerned with the client’s vision for the estate

plan other than just the fact that the client has an estate plan.

The financial

advisor may not know that the client has decided (in consultation with the

attorney) that 20 percent of the estate should go to charity upon the client’s

death.

The attorney simply

drafts the vision into the estate plan. But, had the financial advisor

recognized that part of the estate plan, he or she may have modeled additional

giving techniques.

For example, the

financial advisor may have proposed a gift to a charitable remainder trust that

would hit three sweet spots for the client:

• Provide a stream

of income back to the client for life, thus providing the security and income

through retirement years

• Provide an

immediate tax deduction (which a gift at death does not do)

• Accomplish the client’s goal of giving a sum to the

charity at death.

Other examples abound.

A financial advisor may track out-of-state investment

property and the attorney should know about those to place in trust or limited

liability corporations as warranted.

An attorney may spot liability concerns that would

cause a financial advisor to suggest increasing umbrella insurance coverage.

A financial advisor would understand the source of

client’s wealth (e.g. inheritance from the client’s father where father’s

intent was to keep the inheritance both separate and ultimately for grandkids)

and spark the attorney’s imagination to create an inter-vivos irrevocable trust

for the client’s children that is protected from creditors; and aligning

beneficiary designations between the financial advisor (e.g. “to my children”)

and the attorney-drafted estate plan (e.g. “to the trust for the benefit of my

children.)

The point is that your attorney and your financial

advisor should be talking and working in concert to produce tailored plans for

you.

Only by integrating the attorney side and the

financial advisory side can the client have a truly holistic plan that

represents their goals for their life and their goals for assets after passing.

Beau

Ruff, a licensed attorney, is the director of planning at Cornerstone Wealth

Strategies, a full-service independent investment management and financial

planning firm in Kennewick.