Man with his kid talking on phone about estate planning vs financial planning.

3 minute read

Estate Planning Vs Financial Planning: You Can’t Have One Without The Other

Every good financial plan needs a complimentary estate plan. Learn why you need both plans at Trust & Will

Patrick Hicks

Patrick Hicks, @PatrickHicks

Head of Legal, Trust & Will

Everyone wants to be able to leave a lasting financial legacy for their loved ones when they pass away. However, the best means to an end is often up for debate. For better or worse, people often pit estate planning vs. financial planning when deciding the fate of their net worth.  

The estate planning vs. financial planning debate is understandable. Both strategies aim to increase and preserve wealth over generations. Nonetheless, it's no longer enough to prioritize one over the other; the two are not mutually exclusive. Instead, it's time to start looking at estate planning and financial planning as two necessary cogs in the same machine. 

Estate planning and financial planning are crucial aspects of preparing for the future, especially when building a lasting legacy for yourself and future generations. As such, we've developed this guide to help our readers incorporate estate planning into financial planning. You'll find everything you need to secure your financial future below, including:

What is estate planning?

Estate planning is the process of taking inventory of all your assets and preparing them to be distributed to beneficiaries after you pass away. It requires you to consider how your assets and personal affairs will be managed when you are no longer around. The process relies heavily on creating legal documents that lay out your wishes and instructions for your estate (the sum of all your assets after you pass). 

With the help of an estate plan, you can ensure that your assets are distributed according to your wishes, ultimately providing for loved ones or charitable organizations. It can also provide peace of mind for yourself and your loved ones while mitigating disputes and legal challenges that arise when there is no clear plan. 

What is financial planning?

Financial planning is the act of creating and adhering to a comprehensive strategy for managing your finances. While it can be applied to short-term goals, financial planning typically lays out a long-term strategy to grow and preserve capital. The best financial plans will analyze your current financial situation, determine your financial objectives, and create a plan to help you achieve the goals you set for yourself.

Preserving wealth is equally as important as growing wealth in a financial plan. Financial security means protecting and sheltering your money with vehicles like insurance, estate plans, and Trusts. The goal is to have enough money to do what you want — now and in the future. By planning and being smart with your money, you can achieve your goals and enjoy financial security.

How estate planning complements financial planning

Separately, financial planning and estate planning can help secure your financial future. Together, these two processes can secure your finances (and even your legacy) for generations.

Whereas financial planning centers around formulating a plan for your current and future financial needs, estate planning attends to the distribution of your assets after your death. When used in tandem, these plans can provide financial security during your lifetime and ensure it evolves into a legacy for your beneficiaries.

Financial planning can assist in the wealth-building process and help you preserve the assets you manage to accumulate. Estate planning, on the other hand, can help ensure that your assets will benefit named beneficiaries before and after you pass away.

The synergy between financial planning and estate planning will help your finances reach their full potential. For example, you may set up a Trust in the name of your estate to ensure your beneficiaries receive the appropriate assets in the most tax-efficient way possible. You might also establish a financial plan that takes advantage of life insurance to protect beneficiaries — even after you pass away.

Financial and estate planning are both invaluable for realizing financial security — for you and your legacy. By implementing both strategies, you can ensure your wealth is protected and distributed over generations according to your wishes.

Estate planning belongs in any wealth-building strategy

The estate planning vs. financial planning debate no longer holds any water. If for nothing else, any proper wealth-building strategy will utilize both to preserve capital; you can't have one without the other. 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.

Here at Trust & Will, we’ll make sure your estate plan complements your overall financial strategy. You can create a fully customizable, state-specific estate plan from the comfort of your own home in just 20 minutes. Take our free quiz to see where you should get started, or compare our other estate planning and settlement options today! 

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Trust & Will is an online service providing legal forms and information. We are not a law firm and we do not provide legal advice.