What are guardianship of minor children, wills, and beneficiary designation and why are they important for estate planning?

Estate planning is making a plan for what happens to your stuff when you're not around anymore. You might have learned about why it's important, but now let's talk about how to come up with an estate plan. We'll learn about wills, beneficiary designation, and guardianship of minor children.

Key terms in estate planning

Let's define some important words you'll need to know when dealing with an estate plan:

Will: A legal document that says who gets your stuff when you die.
Trust: A legal arrangement where someone holds your property for the benefit of others.
Beneficiary: The person who inherits your belongings from your will, trust, or life insurance.
Executor: The person who makes sure your will is followed.
Healthcare proxy: Someone who makes medical decisions for you if you can't.
Probate: A court process that makes sure your will is followed and your debts are paid.
Guardian: A person who takes care of your kids if you can't.
Guardianship of a minor child: The legal responsibility for taking care of and making decisions for a child under the age of 18, if you are not able to do so.

What does estate planning look like?

Let's look at estate planning in a real-life scenario:

Ali is a married father of two. He wants to make sure that his wife, Fatima, and their two kids, Amina and Yusuf, are taken care of if anything happens to him. Ali sets up a trust, which allows Fatima to manage his property and assets on behalf of their children. He designates Fatima as the beneficiary in his will, as well as the executor to make sure everything is carried out according to his wishes. Ali also names Fatima as his healthcare proxy in the event that he is unable to make medical decisions for himself.
Finally, he selects his brother, Ibrahim, as the guardian for Amina and Yusuf in case something happens to both him and Fatima. Ali knows that if he passes away, his will needs to go through probate, but he feels reassured knowing that he has taken care of everything ahead of time.

Practice your understanding

Estate planning key terms

Complete the following using estate planning key terms:

Marvin is thinking about his future and wants to make sure his loved ones are taken care of if something happens to him. He decides to write a

, which lays out how his property and assets will be divided if he dies. In there, he names his sister, Nia, as the

, so she will make sure his wishes are carried out.

Estate planning flowchart

Estate planning may seem complicated, but it only involves a few steps, most of which are done by you. To start creating your estate plan, follow these steps:

Make a list of your assets (stuff you own) and debts (money you owe).
Choose beneficiaries to get your assets.
Decide if you want a will or trust and write it. Most forms can be found online.
Pick an executor to make sure your plan is followed. Let that person know you are naming them as an executor, and check that they are comfortable with doing so.
Choose a healthcare proxy in case you can't make medical decisions. Let your healthcare proxy know what your wishes are.
Pick a guardian for your kids, if you have any, and they are under 18.
Talk to a lawyer to make sure your plan is legal. Your work may offer a legal service, or you can get forms and instructions on how to file them online.
Update your plan if your life changes (marriage, divorce, new baby, etc.).

Conclusion

It's important to understand estate planning, even if you don't have a lot of assets to leave behind. You never know if you might inherit something from a loved one, or be named a trustee or executor of someone else's estate.
By learning about estate planning, you can make sure your wishes or somebody else's wishes are carried out after passing away.

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afif.farizki
Posted a day ago. Direct link to afif.farizki's post “Could other family member...”
Could other family members challenge your will? What if they don't agree to how your healthcare will be managed, the way you distribute your estate, or who you set as a guardian?
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(2 votes)
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- David Alexander
  Posted a day ago. Direct link to David Alexander's post “This is one reason to hav...”
  This is one reason to have your will drafted by a lawyer, then properly signed, witnessed and filed with the local court. When such things are properly done, challenges tend to fail.
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  (1 vote)