We’re 34 and 32 with a $2.5 million net worth – when is the right time to set up a trust for our child?

As a parent, it’s natural to want to take care of your children financially to the best of your ability. And the sooner you start that financial planning, the more peace of mind you might get.

In this Reddit post, we have young parents who recently had a daughter and want to set up a trust for her. But they’re not sure about the timing. Specifically, they’re wondering what sort of net worth they should aim to accumulate before diverting assets into a trust for their child.

It’s an important question to be asking. And the best way to get an answer could be to sit down with a financial professional who can offer customized guidance.

It’s important to prioritize your own needs, too

A lot of parents get into financial trouble because they put their kids’ needs ahead of their own. Many forgo retirement savings, for example, to save for college. Or, they raid their retirement accounts to cover college costs to spare their kids from having to take out student loans.

Some parents also continue to support their children well into adulthood. It’s one thing to let a 22-year-old college graduate move back home for a couple of years, but it’s another thing to send your 34-year-old a check every month to help cover their mortgage. Some parents do the latter at the expense of beefing up their IRAs or 401(k)s, lending to a financial shortfall later in life.

Therefore, while it’s good that the parents in this post are thinking about their daughter’s financial security when she’s very young, it may be a bit premature to put a lot of money into a trust for her. And the reason is that since they’re young themselves, they may not have a solid handle on their long-term financial needs just yet.

The parents do have the goal of retiring early. And they’re also high earners with a very impressive net worth for their age — $2.5 million.

But they also have a lot of question marks. They’re not sure, for example, whether they want to have another child. That could have a huge impact on their finances. So until they have a better sense of what life will look like, they may want to hold off on setting up a trust.

This doesn’t mean they shouldn’t start investing for their daughter’s college, if that’s a goal. The sooner they start, the better. But they should think carefully before putting a meaningful amount of money into a trust.

A financial advisor can help

In situations like these, having the guidance of a financial advisor can be crucial. A financial advisor can sit down with these new parents and help them review their options for taking care of their daughter financially while helping to ensure that their needs are also being prioritized.

From there, an advisor might choose to refer the couple to an attorney who can put trust documents in place should they decide to go that route. But it’s good to have that conversion with a financial advisor first to talk through the numbers part.