09 Dec What Every Parent of College Aged Children Needs to Know: Essential Estate & Financial Planning Documents for your Children
Written by: Bradley R. Coppedge, Esq.
As parents, we always have our children’s best interests at the forefront of our minds. And we usually try to do anything we can for our children. However, many might take for granted the authority we have had as a parent for the last 18 years. How often have you called the bank on the student account or credit card they have that you set up late in high school? Or called their pediatrician to discuss an issue? Or gotten involved to assist with an issue with some financial transaction? And of course, there has never been any question of your authority in this regard, either with your child, or with whomever you have been dealing. You are, after all, the parent.
Once your child turns age 18, nothing changes,….except that everything changes. That is because once your child turns age 18 (19 in Alabama), it’s still “YOUR” child, but he or she is no longer “A” child. They are legally an adult. Legally, this cuts off virtually all of your rights on your child’s behalf.
This is particularly true under HIPAA laws and the privacy rules associated with the same. If your child has a medical emergency, especially if out of town, you are not only not in a position to make decisions for your child, you will not even be able to be provided information, at least until you get there in person, and even then, there is no assurance in this regard. Read that again. If your child is injured or in an accident, the medical provider may not even provide you any information, and for that matter, they may not even confirm for you that your child is there and under the care of that hospital or health care provider!
Here is a brief outline of what you need to do once your child is legally an adult:
- Power of Attorney (POA). A Power of Attorney, also known as a Financial Power of Attorney, General Power of Attorney or Durable Power of Attorney, is an instrument by which your child authorizes you to act on his or her behalf in all matters other than health care decisions. Importantly, it is this document (not the Heathcare Directive discussed below) that nominates you as your child’s HIPAA agent for access to medical record information.
- Advance Directive for Healthcare (ADHC). In most states, including Georgia and Alabama, an Advance Directive for Healthcare protect a person’s right to refuse medical treatment, or to request specific medical treatment, and also appoints an agent to make decisions if the person is unable to do so due to injury, illness or otherwise. Just as with the regular POA, the agent under an ADHC is a person whom your child appoints to make decisions about his or her medical care if he or she becomes unable to make those decisions himself or herself, whether due to illness or injury, or due to being unconscious, in a coma, or under anesthesia. (Make no mistake, this raises some emotional issues, but it is of utmost importance to have in place).
- Liability/Auto Insurance. If your child has a vehicle off at school, is it titled in his or her name, or your name? If it’s under your name, then the child is probably on your insurance, which is common. However, that also means that any liability associated with the vehicle rests squarely on you. If your child is on your auto insurance, and if you don’t already have one, you should seriously consider obtaining a Personal Liability Umbrella Policy (PLUP). This provides excess coverage for any claims over your basic liability limits, and these policies are generally very affordable. Talk to your insurance agent. For that matter, you might consider retitling the vehicle in your child’s name, and getting him or her their own policy to get the child off of yours, though this will likely result in higher overall premiums.
- Renter’s insurance. Especially if your child is in an apartment, you may want to look at Renter’s Insurance, to cover both any liability from injury suffered by the child’s guests, and also the child’s personal belongings in the apartment. So long as you still claim the child on your own homeowner’s policy as a dependent, and list the child’s home address as your own, the child may still be covered under your homeowner’s policy, but you should check with your insurance agent. But even if your child is covered on your policy, any claim then goes against YOUR insurance. Why not consider getting the child his or her own renter’s coverage? It is generally pretty surprisingly affordable.
- Life Insurance. I have this conversation with virtually every estate planning client, even (or especially) those with minor children. If you haven’t already, it is wise to take out a whole life policy on your child, one that has guaranteed increases without evidence of insurability. For example, you might take out a $50,000 whole life policy that provides for adding increments of $50,000 or $100,000 at certain ages or life events (marriage, birth of child, etc.), without proof of insurability. You can then transfer the ownership (and the responsibility for paying!) after college graduation or at whatever age you feel they can assume the responsibility for paying and maintaining the policy. I’m sure the same as me, you have friends who had some cancer or other diagnosis at a relatively young age that impaired, or even prevented, their ability to buy affordable life insurance later in life, even if they’ve gone on to live fully healthy and long lives.
- Last Will and Testament. Last but not least (though actually, of these 6 steps, it probably is the least important at this age unless your child has meaningful assets in his or her own name or holds a power of appointment in a trust of which he or she is the beneficiary), you might consider having your child execute a simple Last Will and Testament. Having your child execute a Will isn’t just about where his or her assets go at death, it also makes the administration process much more efficient and less costly. And remember, a Power of Attorney always expires at death, so it is the Executor of your child’s estate who would be responsible for dealing with creditors, assets, school loans, etc. (Again, I know this isn’t easy to think about, but it is important).
- Primary Care Physician. While this is not a legal issue, has your child moved from a pediatrician to a regular physician? While continuity of care can be an important issue, having this new relationship in place before a major need arises can also be very beneficial. Most pediatricians will allow a transitional period in which they continue to see their over age 18 patients, sometimes even up to age 21, but you may want to inquire with your child’s pediatrician so that there are no surprises.