What is estate planning?

Estate planning is fundamentally about the comprehensive strategy involved in managing and disposing of an individual's assets both during their lifetime and after their death. This process ensures that an individual's wishes are honored regarding how their property and assets will be handled, what will happen to their dependents, and how their affairs will be managed. It encompasses creating wills and trusts, designating powers of attorney, and setting up healthcare directives. This approach provides peace of mind that an individual's wishes regarding asset distribution and care for dependents will be respected, thereby facilitating a smoother transition of wealth and responsibilities.

The other options focus on narrower aspects of estate planning. For instance, simply reducing tax liabilities is only one part of the broader estate planning process and does not encompass the full range of activities involved in managing an estate. Preparing a financial plan specifically for children ignores the broader context of estate planning, which includes considerations for spouses, beneficiaries, and other potential heirs. Lastly, while buying insurance products can be a component of estate planning, it's not the entire scope; insurance can help with liquidity and providing for dependents, but estate planning includes many more elements that go beyond simply purchasing insurance.