Choosing the Right Guardian

It's very important that you name a guardian for your children (if they're under 18). A guardian will take over your parenting role after your death until your child reaches age 18. If you don't name a guardian, the probate court will name a guardian for your children.

We recommend choosing a relative or close friend as a guardian. If your child is older, you might want to get his or her input on whom they would want (or not want). However you make your choice, be sure to list an alternate guardian in case your first choice isn't available.

No matter how close you are to your intended guardian, we think it's important to put feelers out to make sure that you share important ideas about child rearing. Ask yourself:

1. Does this person currently have a good relationship with your child?
2. Do you share the same ethics and values?
3. Are you comfortable with this person's personality and how they handle stress?
4. Is this person financially stable? Your guardian will get reimbursed for all reasonable costs of maintaining and educating your child. But make sure that it won't cause a financial hardship for this person to raise your child.

Choosing the Right Trustee

Choosing a trustee is just as important as choosing a guardian. Except this time the person will be managing and overseeing the well-being of your money rather than your offspring. Your trustee will be responsible for investing, managing and distributing assets that you've placed in trust for your loved ones. Unlike your executor, who handles your finances for a set period of time and then settles your estate, your trustee will be in charge of your money for years–maybe even decades.

We recommend asking yourself these questions about potential trustees:

1. Does this person share your values about money? You don't want a trustee who will be overly aggressive or overly conservative when managing and investing your money.
2. Is this person able to interact well with your beneficiaries or are conflicts likely to arise over requests for trust distributions? You want a trustee who won't cave in to every whim, but who also will be fair-minded.
3. Does this person have knowledge about investing and finances in general?

Once you have your will, and have chosen your executor, guardian and trustee, it's time to move on to Phase Two of your estate planning strategy: deciding whether or not you should avoid probate. Probate is legal lingo for "proving that your will is valid." A simple will does not help you avoid probate; a simple trust does, but can cost $1,000 or more.

But consider the fact that legal fees to probate your will could be 3% of your estate, compared to 1% or less for distributing trust assets. So $500,000 in assets will cost your estate roughly $15,000 if you have a will and only $5,000 if you have a trust.

 

• Click here to read our thoughts on trusts and which ones we prefer.

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