Does Your Estate Plan Match Your Financial Plan?
Does Your Estate Plan Match Your Financial Plan?
Most people treat their estate plan and their financial plan as separate documents — one handled by an attorney, the other by a financial adviser, with little coordination between the two. The result is often a plan that looks complete on paper but has significant gaps in practice: trusts that were meant to receive assets but are not named as beneficiaries, accounts that were meant to pass outside the estate but are titled incorrectly, and strategies that made sense in isolation but conflict with each other.
The Coordination Problem
An estate plan is a set of legal documents — a will, possibly a trust, powers of attorney, healthcare directives. A financial plan is a strategy for managing assets, income, and risk over time. These two things need to work together, but they are typically created by different professionals who do not talk to each other. The attorney drafts documents based on the client's stated wishes. The financial adviser manages the portfolio. Neither has a complete picture of what the other is doing. The client assumes the two are aligned. Often they are not.
Beneficiary Designations vs. Your Will
Retirement accounts, life insurance policies, and annuities pass by beneficiary designation — not by your will. If your will says your assets should be divided equally among your three children, but your IRA names only one child as beneficiary, the IRA goes to that one child. The will does not override the beneficiary form. This is one of the most common and consequential misalignments between estate plans and financial plans. It requires reviewing both documents together to identify.
Trust Funding
A revocable living trust is only useful if assets are actually transferred into it — a process called funding the trust. Many people go through the expense of creating a trust and then never fund it, leaving their assets to pass through probate anyway. Others fund the trust at creation but add new accounts or assets over time without retitling them. The trust document and the actual ownership of assets need to be reviewed together to confirm that the plan will work as intended.
Account Titling
How accounts are titled affects how they pass at death. Joint tenancy with right of survivorship passes automatically to the surviving owner. Tenancy in common passes through the estate. Community property has its own rules. An account titled in your name alone, without a beneficiary designation, passes through probate. Getting the titling right — and keeping it consistent with your estate plan — requires attention to detail that is easy to overlook when accounts are opened or transferred.
Tax Considerations
Estate planning and tax planning intersect in ways that require coordination. The tax treatment of inherited assets — the step-up in basis for appreciated property, the distribution rules for inherited retirement accounts, the estate tax exemption — all affect how assets should be structured and transferred. Strategies that make sense from a tax perspective may conflict with estate planning goals, and vice versa. Getting this right requires someone who understands both.
When to Review
Estate plans should be reviewed after any major life event: marriage, divorce, the birth of a child, the death of a named beneficiary or executor, a significant change in assets, or a change in applicable law. Beyond life events, a periodic review — every three to five years — is a reasonable baseline. The review should include both the legal documents and the financial accounts to confirm they are aligned.
Alignment Requires Intentional Coordination
An estate plan and a financial plan that are not coordinated are not really a plan — they are two separate documents that may or may not work together. Getting them aligned requires someone who can look at both, identify the gaps, and help you address them. That is not always easy to find, but it is worth looking for.
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