In the past, most people didn’t earn a significant income until well into their 40s or 50s. However, today we have plenty of young entrepreneurs who have made millions before becoming middle-aged, thanks to the tech industry.
Oftentimes, these individuals are coming into extreme wealth before getting married or starting a family, which makes developing an estate plan all the more important, especially if they want to incorporate charitable giving.
A certified financial planner told Reuters that some wealthy young people question whether they need an estate plan until he tells them that their money will go to the state if they die without one. That usually gets them to take action, he said.
And while no one likes talking about their own death — especially at a young age — an estate planning specialist with Charles Schwab told Reuters that an estate plan is necessary for anyone with $100,000 or more who doesn’t want the probate court to decide what should happen to their assets when they go.
Reuters reported that that many well-off younger folks who want to make large contributions to charity often take advantage of something called a donor-advised fund. It is offered by many brokerage firms and charitable foundations and is similar to a mutual fund in that it offers flexibility for giving later on.
This option also results in an immediate tax benefit instead of waiting until the donation is actually granted to the charity. A 37-year-old software engineer said he chose to create a donor-advised fund because it will allow him to “give a more impactful amount of money” years down the road.
Ultimately, no matter how old you may be or where you would like your money to go when you’re no longer around, an estate plan can help make sure that your wishes are met when the time eventually comes.
Source: Reuters, “Estate planning for the young, rich and childless,” Beth Pinsker, June 2, 2014