Retirement and Estate Planning, Part 2
Question 1: Discuss choosing a guardian during estate planning.
Answer 1: b) When choosing a guardian in estate planning, there are several things to keep in mind: It should be a person who is able to provide a stable and nurturing home life for your children. If the selected guardians already have children, are they prepared to take on more? Consider asking someone who is closer to your age versus your parents. Although they may be excellent grandparents, the burden of raising children may be too demanding. Think twice about asking a husband and wife to be co-guardians to avoid a custody battle should the couple later divorce.
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Question 2: Explain the types of documents that should be prepared during estate planning in the event that you become incapacitated.
Answer 2: In the event that you become incapacitated, there are four main documents you should have: (1) Durable power of attorney: A durable power of attorney grants the power to sell the home, and gives the holder legal authority to sign the sales contract for you. (2) Living will: This lets your family and health care providers know your wishes for medical treatment should you become unable to communicate them directly. (3) Medical power of attorney: This is someone you designate to make medical decisions if you are unable to communicate with your doctors. (4) Living trust: This is used for holding and distributing assets in order to avoid probate.
Question 3: Briefly discuss the importance of trusts in estate planning and the three parties involved.
Answer 3: The main purpose behind a trust is the protection of assets from misuse by the beneficiaries. Creating a trust allows you control of asset distribution, not only during your lifetime, but after your death. Essentially, a trust is an agreement among three people: the grantor who contributes property to the trust, the trustee who executes the purposes of the trust, and the beneficiary who receives the benefits of the trust in accordance with the trust agreement. A trust should contain provisions of how the trustee should act given certain situations, for example, managing the money for a minor child.
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