Chapter 1: Getting Started
The Financial
Planning Process

Cynthia Leach

Accountant & Estate Planner

We advocate a process for making decisions about personal financial planning. We have found that many complex questions can be understood and then answered with relative ease by following this process. The process involves six steps: (1) identify the goals, (2) gather the data and make assumptions, (3) evaluate the feasibility of your goals, (4) develop your strategies, (5) implement the decisions, and (6) review your progress. In an estate planning context, these steps can be summarized as follows:

1. Identify the Goals

The starting point of a successful estate plan, as with any area of financial plan-ning, is identifying and defining your goals. What is the most appropriate way to dispose of your assets at your death? Who will receive what, and when will they receive it? Will assistance in the management of the assets be required? If you have minor children, who will care for them the way you would, and with what financial resources? How can the costs of administering your estate, including taxes, be minimized? Have you appointed an agent to act on your behalf in the event of your disability? Will your family be adequately provided for in the event of your premature death?

2. Gather the Data and Make Assumptions

After you have identified your goals, you can begin to gather data. You will need to collect your current estate planning documents, including wills and trust instruments, beneficiary designations on retirement plans and insurance policies, and title documents that set out the ownership of major assets such as your home. In addition, you need to quantify the value of your assets and your liabilities. You must also consider nonfinancial issues, such as asset management and protection and the timing of when you want your assets to ultimately pass to your heirs.

3. Evaluate the Feasibility of Your Goals

Most goals dealing with the disposition of assets can be accomplished with estate planning. However, you cannot completely control how your heirs spend their inheritance. Similarly, in larger estates, some amount of estate taxes may be incurred, even with planning. It may not be possible to meet goals of complete control or elimination of taxes.

4. Develop Your Strategies

Identify the planning documents that must be drafted or revised. Determine which tax planning strategies may be appropriate. Consider the individuals or entities to which you want to entrust your assets after your death. Assess the needs of your family members -- including your spouse, parents, children, and grandchildren -- in light of your death. Consider the financial security of your survivors and the adequacy of your life insurance coverage.

5. Implement the Decisions

Effective decision making is more than a matter of saying "yes" or "no;" your decision is meaningless until you turn your words into deeds. In this step, you implement the strategies that you developed. Assign specific tasks to yourself and other family members, and determine whether professional assistance from tax advisers, attorneys, trust officers, or insurance representatives is needed.

6. Review Your Progress

This final step is easy to ignore, but it is among the most critical. Few decisions are static; we base our choices on a series of events and circumstances that can and do change.

Every few years or after a major life event -- a marriage, adoption or birth of a child, death of a child or spouse, disability, serious illness, inheritance, divorce, retirement, or career change -- you should reconsider the various aspects of your plan. Have your goals changed? Have new and better options become available? Are there better ways to do what must be done? Don't be afraid to revise your goals, gather more data, reconsider your choices, make new strategies, or carry out your original strategies differently.