The Financial Planning Aspects of Estate Planning

By:  Olivia R. Holcombe-Volke, J.D. – Senior Principal and Estate Planning Team Leader – Elville and Associates, P.C.

Initially, my thoughts on this topic – “Financial Planning Aspects of Estate Planning” – were to elucidate and emphasize the importance of working with a financial planner (as well as a tax planner) as part of the estate planning process.  I find that many potential clients with whom I meet do not yet have a financial or tax planning professional as part of their growing cadre of advisors, and some even (innocently, but mistakenly) expect that I will be able to provide such guidance and expertise.  However, as I further developed this idea, I realized that the topic of the “Financial Planning Aspects of Estate Planning” covers much more than just that one important piece – and there is a lot more that I want to say when trying to explain the vital role that financial planning plays in any successful estate plan, and why, and how.

As is true with the subject matter of “estate planning,” I find that, while many people may have a vague sense of what “financial planning” means, it can be useful to start with a basic description.  At its core (and, keeping in mind that, as previously indicated, I myself am not a financial planner, so this is a very basic description), financial planning involves performing an analysis of personal life circumstances (including family, health, age, life stage, etc.), taking into account goals, and tolerance for risk, and determining how, amongst the choices available for investments and uses of assets, when combined with appropriate budgeting and tax planning, someone can achieve personal financial goals.  In sum?  It involves planning for and ensuring that the necessary sources of assets exist to adequately fund lifetime and after-death goals.

When juxtaposed to this, it is interesting to see how similar the structural description of “estate planning” is.  Estate planning involves performing an analysis of personal life circumstances (family, health, age, life stage, etc.), and taking into account goals, and tolerance for risk, as well as the financial/asset picture (i.e. what assets comprise the estate?), and determining how, with the appropriate legal documents and structure, someone can achieve personal estate planning goals.  In sum?  It involves planning for and ensuring that the necessary legal structures are in place to accomplish lifetime[1] and after-death goals.  All of which sounds remarkably similar to the basic structure and description of financial planning.

Thus, the financial planning aspects of estate planning can best be described as 1) determining if you have sufficient assets (perhaps of particular types and structures) to accomplish your estate planning goals, and 2) ensuring that your assets are structured properly with your estate planning documents to successfully accomplish your goals. 

This latter point is called “asset alignment,” and it is a vital and often overlooked aspect of estate planning.  Thorough and accurate asset alignment is absolutely necessary for the success of an estate plan.  Its importance truly underscores the utility of working with professional financial advisors, tax, and estate planning advisors, who will have the knowledge and ability to assist in the necessary alignment of assets, to ensure that a client’s goals and intentions don’t end up suffering from failure due to entirely innocent missteps on the client’s part, based upon common misconceptions regarding how asset structures work in terms of lifetime access and after death distribution.    

An example of one such common misconception is that a Last Will and Testament document covers every asset that someone might own – that is, that what the Will says will apply to every asset owned by the person signing the Will.  This, in fact, may not, and regularly, is not, true.  For example, how an asset is titled will have an impact on whether or not the Will applies to it.  Is the asset owned individually, or is it owned jointly with another person (or multiple people)?  Furthermore, if an asset has a beneficiary designation, or a Payable on Death (POD) or Transferable on Death (TOD) designation, this will have an impact on whether (and how) the Will applies to it.  Thus, depending upon the answers to these asset specific questions (and more), an individual’s Will may not actually apply to and control the distribution of everything that individual owns.  Without taking a comprehensive look at both the estate planning goals AND the assets and how they are structured, the assets may not in fact correlate with the plan in the manner that is believed or intended.

Another example of common and entirely innocent missteps that can occur when actions are taken without the assistance of professional advisors, or, more specifically, without a thorough understanding of the financial planning aspects of estate planning, is with regard to a seemingly simple action (adding someone else’s name onto an account or property) with the potential for grave and unintended consequences.  Many people conclude that they do not need formal or complicated estate planning documents, but will instead skirt that necessity by simply adding someone’s name (like their adult child) to their accounts or real estate.  The risks of which most people are unaware is that by adding someone’s name to an asset, you are also adding exposure of that asset to that person’s creditors (of which the most common ones are divorce and car accidents) – not to mention possible gift and capital gain tax consequences (among other things).

A successful estate plan is one that includes the necessary legal documents AND the comprehensive alignment of assets with those legal documents (and the goals covered therein).  None of this is intended to imply that a successful estate plan is one without any reliance on Payable on Death/Transferable on Death or other beneficiary designation structures, or joint ownership of property.  Rather, the point is that a successful estate plan requires a comprehensive review and understanding of how the various assets and legal documents and structures work, to ensure that they are structured to successfully work together in the desired and intended manner.  Not to mention that taking financial planning into account in conjunction with estate planning can go a long way toward ensuring tax minimization and avoidance, asset protection, the use of the most appropriate assets to accomplish particular goals (charitable goals, for example), and adequate preparation for an unknown future with regard to potential healthcare needs and costs.

[1] An oft overlooked reality of estate planning is that it is not isolated to what happens after death.  It also addresses what, whom, and how you want your physical and financial realities handled if you are alive but incapacitated (or otherwise need assistance) for any reason.

To listen to and watch this year’s April 22nd webinar I presented on this topic, please visit our website’s “Webinar Recordings” section or click the link here

Ms. Olivia Holcombe-Volke is the Senior Principal, Estate Planning Team Leader and member of the Executive Management Team of Elville and Associates.  She handles all aspects of estate planning, including the initial drafting of wills, trusts, advance directives, and powers of attorney, as well as the continued revision and updates of those documents as life and statutory changes occur. She also regularly works with clients who have elder law and/or special needs concerns, whether on behalf of themselves or a family member, assisting with Medicaid and Veteran’s asset protection efforts, special needs planning, and the difficult issues attendant to mental and physical incapacity.  Olivia can be reached at, or 443-393-7696 x120.

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