The Heritage Law Center, LLC Blog

Financial Planning vs. Estate Planning

POSTED ON: October 17, 2016

Financial planning and estate planning both have extremely important, and sometimes interconnected, functions. Both are also highly specialized in nature, requiring you to find the right partner to work with in each area.

Both the Massachusetts estate planning attorney and financial planner need to understand the basics of the other professional’s area of practice and be willing to work together with you to achieve your goals. However, an estate planning attorney should not give you financial advice and a financial planner should not give you estate planning advice. Neither is licensed or insured to do the other’s job.

Financial planning can often have a more immediate goal than estate planning. Financial planning allows you to make decisions about your assets to help you achieve your goals in life. This planning can include saving to buy a home or planning for retirement. An experienced financial planner can help you understand your options and the products or
investments needed to help you achieve your goals.

An estate planning attorney is adept at understanding state and federal laws to allow you to secure your financial legacy for your family, as well as the communication of your medical wishes in the event you are unable to express them. Your planning may include a power of attorney for finances, a health care proxy and an advance directive for health care, and a will or revocable living trust. Estate planning can give you peace of mind by planning for the uncertain future events, expressing your wishes, and also avoiding probate and/or estate taxes.

Unnecessary Tax

One of the most important things for a planner to check in this area is if a married couple is properly using a credit shelter trust when their assets exceed the estate death tax exclusion amount, which is $1 million in Massachusetts. While the unlimited marital deduction protects widowed spouses when assets are passed, advisors need to keep later generations in mind. By working with a client in advance and recognizing potential asset challenges that come with death tax, advisors can use a credit shelter trust and protect heirs from future tax bombs on the state and federal level.

Unnecessary Probate Costs

The court-directed probate process can create unnecessary delay and expenses. For financial accounts, the most common thing that leads to probate is the titling of non-retirement assets with either a single name or joint tenancy. With such titling, when the last account owner dies, typically those assets will go through probate.

Financial planners should be aware of such issues and make sure to point out potential titling problems. To avoid this scenario, an estate planning attorney may draft a revocable living trust and make sure assets are properly re-titled.

Properly Titled Retirement Account Beneficiaries

According to a number of recent studies, less than 40 percent of retirement accounts use secondary beneficiaries. In this type of a situation, if the primary beneficiary pre-deceased the retirement plan owner and the beneficiaries weren’t updated, which is often the case, those assets would be subject to probate before they would go to the heirs.

Also, there are at least five common types of beneficiaries that can be used on a retirement account:  a spouse, children, a charity, a trust or a non-family member. The rules for each group are different and, therefore, require altered strategies to minimize unnecessary costs and potentially wasted time for heirs.

Assets in Other States

Make sure that all assets owned in other states are using the correct legal documents to insure those assets will get to the right heirs in a timely manner.  Real estate, for example, must go through probate in the state where it lies. Having out of state property titled into your trust can avoid a multiple probate scenario where expenses can really add up fast.

Partnership Between Planner and Attorney

There is value in a strong partnership between your financial planner and estate planning attorney.  It’s vital you not only have your finances secured, but have a strong estate plan as well.

For more information on estate planning please contact Matthew Karr at If you do not already work with financial planner you trust, we would be happy to recommend one for you.