On Sunday I turned 25 and after my massage, dinner, and cake, I decided it was time to conduct a financial review. My 401k is on track and Roth IRA is almost maxed out for the year – retirement savings check. My budget is solid and my spending tracker reflects (most!) of my purchases. I have a healthy emergency savings account, rainy day fund, and a growing travel fund and planning for a wedding account.
While everything is in check and on track. I wanted to do a few extra things now that I am a quarter century old. Now many might not think of these things, but they are highly important and anyone can get them set up.
A revocable trust allows me to get my affairs in order in case something were to happen. Essentially it is like a will but more formal and aids in incapacity. Basically, if something were to happen, there is an appointed trustee to help organize and make sure your intensions and affairs are completed. In a more formal definition:
A trust whereby provisions can be altered or canceled dependent on the grantor. During the life of the trust, income earned is distributed to the grantor, and only after death does property transfer to the beneficiaries. Also referred to as a “revocable living trust“.
For the most part, you can put anything into a trust: home, cash, retirement savings, valuables, etc. and it has some nice perks:
1) It avoids probate. Once you die and say, have a will, it has to go to the probate courts to get administered and thus becomes public record. And it can be a lengthly process.
2) It allows for privacy. Since there is avoids probate, there will be no public record. Basically no long lost cousin to come out of the woodwork claiming that money is theirs.
3) There is flexibility. A revocable or “living” trust can be changed at anytime.
4) It has great prenuptial protection. Once an item is placed in the trust before marriage, it remains the property of the trust and thus separate from property accumulated during the marriage. Since it is “living” you can decide if you want to move assets into the marriage or not.
and 5) It can avoid or eliminate estate taxes. Okay this is a big one, because I only like paying Uncle Sam when I have to. Trusts can be worded and funded in such a way to ensure full utilization of the marital deduction and applicable credit for estate tax purposes. Basically it ill defer taxes for as long as possible.
In a more simple format, it is additional liability insurance. As we grow older, we come into more and more assets and continue to grow our net worth, it could be potentially used in a lawsuit against you. Umbrella insurance is designed to protect you from major claim and lawsuits in addition to your current home and auto insurance. (Plus its usually pretty cheap too)
Car and Condo Policy Review
Now that I am 25 and a reliable driver, I can get a discount. Of course, none of the insurance companies want to just “hand over the money” but it is good to call to see if they will give you an additional discount because of your age.
Check Credit Score
While it is always good to check your credit on a regular basis, since 25 is such a milestone, I wanted to especially make sure that my credit and credit report were on the up and up. Usually by 25, you begin to plan or consider larger purchases or life events that will impact your life.
What kind of financial review did you do after a major life milestone?
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