Estate planning has two parts. The first part consists of:
Multiple Choice
building your estate through savings, investments, and insurance.
transferring your estate, while you are alive, in the manner you have specified.
deciding who is going to get what.
evaluating your assets and liabilities.
planning for the period right after you die.
The correct answer and explanation is :
The correct answer is:
building your estate through savings, investments, and insurance.
Explanation:
Estate planning is the process of preparing for the management and distribution of your assets and liabilities, both while you are alive and after you pass away. Estate planning has two key components. The first part, as stated in the question, is about building your estate. This includes saving money, making smart investments, and purchasing insurance to help protect your assets. Building your estate is the foundation of estate planning because it focuses on accumulating assets over time to ensure you have a stable financial base, which can be passed down to your beneficiaries.
Savings, investments, and insurance all play important roles in building an estate. Savings involve putting money aside for future needs or emergencies. This can include setting up retirement accounts like 401(k)s or IRAs, or simply having cash reserves. Investments are aimed at growing wealth over time. Investments in stocks, bonds, real estate, or other vehicles help increase the value of your estate. Insurance serves as a safety net for your loved ones by providing financial protection in case of unexpected events such as death, illness, or accidents. Life insurance, for example, ensures that your beneficiaries are financially supported when you’re no longer there to provide for them.
By building your estate in these ways, you’re ensuring that when it comes time to plan for how your estate will be transferred (the second part of estate planning), your assets will be sufficient to meet your goals. In essence, the first part of estate planning focuses on growing what you own, while the second part focuses on how you distribute it.
