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Why Tax, Estate & Financial Planning Are Easily Confused

Tax planning, estate planning and financially planning are often easily confused, and sometimes considered to be one and the same thing. They are not at all similar to one another, and each are worthy of their own considerations.

Who Can Provide These Services?

To begin with, estate planning is performed by an attorney, while financial planning is often performed by financial professionals, accountants, advisers and bankers. Tax planning usually involves a tax professional, accountant or CPA. By combining all three together, beneficiaries can maximize the amount of money they receive through an inheritance from an estate.

Financial Planning

Financial planning often involves a variety of investment instruments including bonds, stocks, futures and mutual funds. Developing a solid financial plan will provide you the monies and assets you will require once you retire.

Estate Planning

Estate planning is about legal documents that include wills, living trusts, irrevocable trusts, health care proxies, special needs trusts, powers of attorney and other valuable instruments.

The reason to develop an effective estate plan concerns three primary objectives that include:

  • Deciding who controls all your valuable assets both tangible and intangible
  • Determining who will enjoy all the benefits of the assets while you are still alive in good health, and who will enjoy them once you have passed on
  • Formulating a plan to specify how your assets will be distributed upon your death

A well-designed estate plan is based on who controls your assets and when they will control them. Intricate estate planning will consider most outcomes after your death that includes spouses that remarry, or become incapacitated, along with the dynamics of children that become divorced or file for bankruptcy. It also determines who remains in control and receives benefits of the assets you have worked hard to achieve.

Tax Planning

Tax planning is an essential tool used to minimize any tax levied on the inherited portion of an estate to its beneficiary, and to maximize inheritance. Tax planning takes into account all the exemptions legally allowed at the local, state and federal level.

Tax planning, financial planning and estate planning can significantly impact one another. By proper planning of all three aspects together, an estate owner can always maintain full control of their assets during their lifetime and beyond.