Have you ever considered the interrelationship between different types of planning? There is a direct relationship. One aspect of planning affects the other. Here are some examples:
Estate Planning vs. Financial Planning. With estate planning you plan your estate for the benefit of your heirs. But, if your financial plan goes awry (more debt, less income, and/or less savings) it could easily affect your strategy. For example, if your estate plan includes charitable giving as a part of your strategy (if you have a charitable remainder trust, as an example) a decrease in the amount of your available assets could affect the amount you can practically give. In other words, with the recent market turmoil, you might now be "giving beyond your means."
Also, if your financial and investment plan is hugely successful, you may have estate or inheritance tax issues which you might not otherwise have.
College Planning vs. Retirement Planning. As Deborah Fox recently wrote in the January 2009 issue of Financial Planning magazine, "college planning is retirement planning." Every cent plus future never-realized appreciation which you spend on college is taken away from retirement. Thus, if you sink $100,000 into college for your children the future value of that amount in 25 years, even at a modest 4% rate of return, would be well over $260,000. Of course this is highly simplistic, because college funds do not (poof!) appear out of the air, but are saved over a substantial period of time. That means that there is a potential for even more never-realized income.
So, what do you do? Here are just a few suggestions:
- Get a financial planner. Many don't do this, but consider getting professional assistance.
- Get an estate planner. So many people decide to "save a buck" and do their own estate planning. Often this is with less than desirable results. It's hard to integrate your strategies when there is no strategy.
- Integrate saving and borrowing into your college planning. I will admit: There are many disputes on this score between planners on this issue. Many planners find borrowing an anathema, while others embrace it. Consider this, however: Your children (or, potential children) have a much greater number of earnings years than you do as parents.
Also, consider this analogy: the logic behind a city borrowing to pay for a public improvement is that the resurfaced street, for instance, is to be used for many years by many taxpayers and motorists. It would not be fair to saddle the present taxpayer with all of the cost, but to spread it out over time. The same could be said for college borrowing.
I suggest postponing borrowing as long as possible by using savings, but recognize that careful borrowing (especially through the federal student loan program) is a perfectly appropriate way to go.
These are just a few suggestions. However, the first step in moving forward is...taking the first step.
Disclaimer: The information in this article is not legal advice, and the use of it does not create an attorney-client relationship. Any liability that might arise from your use or reliance on this article or any links from this article is expressly disclaimed. This article is not to be acted upon as if it were legal advice, and is subject to change without notice, or may include obsolete or dated information, or information not relevant to your jurisdiction. If you require legal services, you should consult with an attorney.
As a a licensed attorney located in the Los Angeles San Gabriel Valley, Larry Stratton is in a position to coach and advise you, and to help you plan for your future. The Law Offices of Larry D. Stratton specializes in estate planning, business formation and appellate practice. Larry Stratton also blogs on estate and financial planning issues at Planner's Thoughts.
Larry Stratton is a graduate of Whittier College School of Law, which is a member school of the ABA and the AALS. He has represented numerous clients in the California Court of Appeal, and is admitted to practice in all California courts, the Ninth Circuit Court of Appeal, and also the United States Supreme Court. From 1983 to 1984, he was a member of the Whittier Law Review.
Larry Stratton is also a Registered Investment Advisor, and currently speaks on estate and financial planning topics in Southern California.
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