You know you've got to plan for your future: college for the kids, retirement, and security for your family should anything happen to you. Just deciding to make the call to talk to someone can be intimidating. But once you've decided to make an appointment to sit down and talk about your financial future, to whom exactly do you make that call?
Television ads abound for financial planners. Are financial planners and estate planners the same thing? If not, how much do their areas overlap? Who does what?
Here's an essential primer on the roles of financial planners and estate planners in helping to secure your future, and that of your family.
The role of a financial planner is to help you put your longer-term financial goals in order. They will help you create a financial plan that includes your a statement of your net worth (assets minus liabilities), along with your identified financial and retirement goals, and a risk profile. Your individual risk profile is an evaluation of your willingness to take financial risks an conditions that affect your financial risk. For instance, the closer you are to retirement age, the less risk you may be able to tolerate.
The role of a financial planner is to help you put your longer-term financial goals in order.
A financial plan sets forth your goals and a road map for achieving them, taking your net worth and risk profile into account. If you have existing investments, a financial planner will analyze them in the context of how they will likely serve your goals, and may recommend changes to bring your investment strategy more in line with your plan.
One sign that you've found a good financial planner: you leave their office feeling that your questions have been answered, not that you have more than when you went in. A financial planner's job is to educate and empower you to handle your finances. If you feel you're being sold to rather than taught, you may not be with the right financial planner.
Once your financial planner has designed a plan for you, and recommended and made investments in accordance with it, they will monitor it, changing course as needed based on your goals and market conditions.
Estate planners are generally attorneys who concentrate their practice in this area. If your financial planner's role is to help you accumulate wealth, your estate planner's role is to help you maintain control over it and plan for its ultimate disposition. This includes preparing wills and trusts to distribute your estate after your death.
If your financial planner's role is to help you accumulate wealth, your estate planner's role is to help you maintain control over it and plan for its ultimate disposition.
It also includes planning for possible incapacity during your lifetime, such as if you were to develop dementia and be in a sudden accident and be unable to manage your personal, financial, and medical decisions yourself. A complete estate plan includes, in addition to a will and trust, medical and financial powers of attorney.
An estate planning attorney will help you evaluate your goals and develop a customized estate plan designed to provide security for you and your family, minimize taxes, and avoid probate if that is important to you. An estate planning attorney who also practices elder law can also assist you with, Veterans benefits, Medicaid planning and asset protection in the event you may need in-home, assisted living, or nursing home-level care in the future.
Because the law, your assets, your goals and your heirs are all subject to change, estate planning (like financial planning) isn't "set it and forget it." You should review your estate plan with your estate planning attorney at least every few years, and recalibrate it if necessary.
While financial planners and estate planners have distinct roles, the work of one complements that of the other. You should keep your financial planner apprised of your estate plan, and your estate planner aware of your financial plan.
To learn more coordinating your financial plan with your estate plan, contact an experienced Michigan estate planning attorney to discuss your goals and concerns.