When you are in your 20s, you might think that estate planning is something reserved for older adults with substantial assets and families to consider. However, setting up a trust in your 20s can be a smart financial move with several potential benefits.
Whether you already have a will or are just starting with your estate planning journey, there are several reasons to consider getting a trust early in life.
Asset protection
Establishing a trust can help safeguard your assets from various threats. Whether from creditors, lawsuits or other unforeseen circumstances, having a trust can offer a layer of security. It allows you to dictate how your assets should distribute, ensuring management and use according to your wishes.
Planning for the unexpected
Life can be unpredictable, and having a trust can provide a safety net for unforeseen events. If you become incapacitated or unable to manage your assets, a trust can appoint a trustee to handle your financial affairs on your behalf. This ensures that your financial well-being remains intact, even in difficult times.
Privacy and avoiding probate
When you pass away, your assets typically go through a legal process known as probate, which can be time-consuming and expensive. Trusts, on the other hand, allow for a more private and efficient transfer of assets. While it might be the last thing on your mind early in life, your family can benefit from ensuring the quick handling of your estate with less public scrutiny.
Tax efficiency
While you may not have substantial assets in your 20s, your financial situation is likely to improve as you get older. By setting up a trust early on, you can take advantage of potential tax benefits as your assets grow. Trusts can help minimize estate taxes and other tax liabilities, allowing you to preserve more of your wealth for your beneficiaries.
Statistics show that as many as 68% of Americans do not have a will, and even fewer have a trust as part of their estate plan. Regardless of your age and financial situation, though, starting a trust early in life can give you a major leg up in long-term financial planning.