Have Your College-Bound (Adult) Children Done Their Estate Planning?
by: Smith and Howard Wealth Management
It may seem odd to be asked about doing estate planning for college students when they probably have few if any assets. When your children were still under your roof and they were legally your responsibility as minors, there was no additional effort or planning required to handle their affairs. But at 18, your child is an adult, and legally, he or she is the only one who can make certain decisions for themselves.
The pandemic has served to highlight the need for proper legal planning to be in place before an unforeseen event occurs with or to your adult child. The question is: what happens in a worst-case scenario, such as a situation where your adult child needs medical or financial help that they are unable to handle due to unforeseen circumstances? It’s important that your adult child has the proper legal documentation in place to allow someone to act on their behalf in the event an unanticipated circumstance occurs. If not, he or she could find themselves in a potentially dangerous limbo until they are able to handle their affairs.
There are two key items we recommend you and your adult child address as they turn 18:
Healthcare Power of Attorney / Directive
Laws vary from state to state on who is authorized to make medical decisions on behalf of another adult. Your adult child may be attending college or travelling out of state and they will want to know that a chosen loved one can make medical decisions for them if they are sick or hurt in an accident. Under current HIPPA privacy laws, if there is no Healthcare Power of Attorney in place, physicians are not able to share details on their patients. Having a Healthcare Power of Attorney in place would allow for the agent (the person your adult child has authorized) to receive necessary information about the adult child’s current condition and to authorize treatment when the adult child is incapacitated or temporarily unable to make decisions.
Healthcare Power of Attorney documents can also contain Healthcare Directives. Healthcare Directives state your adult child’s desires for life-sustaining measures if they are in a vegetative state, a coma or suffering from some other medical condition from which doctors do not expect them to recover.
We understand that this is a difficult conversation at any age, but especially so when an adult child is young and vibrant. However, the conversation is a lot easier to have when things are normal as opposed to when emotions are running high from the unexpected change in medical status. It is well worth the momentary discomfort to address the need and prepare necessary documentation in advance.
Durable Power of Attorney and Financial Power of Attorney
Individuals may also opt for a Durable Power of Attorney so they can make financial decisions on behalf of their adult children. This can be especially important for high-net-worth (HNW) families. Young adults from HNW families are more likely to have more assets and perhaps even business interests. A Financial Power of Attorney also allows the designated agent (for the context of this conversation, often a parent) to deal with financial aid, student loans, tuition and other bills.
These documents are relatively inexpensive to draft and put into place, making it both easy and wise for all parents with children heading to college to make sure they have them. It may be necessary to have an attorney explain the importance of these documents to the child and why it is in their best interests. As our clients’ “family CFO” we are able to start these conversations with parents, bring their adult children into the conversation and reach an understanding on the importance and next steps. We invite you to reach out to us if you have adult children and have not yet addressed this important financial and legal decision-making process.
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