When a child becomes an adult, it is a great day for most parents. It means less financial responsibility for their mistakes. Remember those crystal decorations that she broke when she was 12? You remember – the ones that cost you nearly $500 at the store? No doubt, raising a child is expensive. There is also the satisfaction that comes with knowing you did a good job and got them that far. Most importantly, many parents glow with pride each year as they pack their 18-year-olds in their cars and send them off to college to chase their dreams. But just because they are now legally adults, this certainly does not mean they are “adults.” We all know just how impulsive and irresponsible young adults can be, and parents should take certain precautions to ensure they still have ways to protect those children.
Make legal preparations for the possible
It is highly unlikely any 18-year-old heading off to state college is thinking about his or her powers of attorney, but this should be at the top of every parent’s list. Why? For one, when they were still minors, doctors and hospitals would just automatically give you access to health records; you could talk to doctors freely and make health decisions for them if they are unconscious. Things are different now that they have grown up. Federal HIPAA laws and state regulations say that you need written permission to do these things. Likewise, banks may not be willing to communicate with parents about an 18-year-old’s finances or accounts. For these reasons, it is highly advisable for parents to sit down with an estate-planning attorney to get these documents in place before the youngsters head off to school.
Make legal preparations for the unthinkable
While no parent wants to even consider the possibility of a child dying or becoming seriously disabled while away at college, it does happen to a lot of people every year. No one is immune to unforeseen tragedies. But what happens to that formative 529 account that Junior was using to fund his private school education? These accounts usually permit the owner to freely transfer the funds to another household member; however, it may be wise to consider who that would be. If there are no siblings, is there another family member who could benefit? These decisions should be made long before a tragedy. The same is true of life insurance policies.
An 18 or 19-year-old is very cheap to insure. Whole life insurance is a wise purchase at that age, because it is as low as it will ever be. Likewise, even an affordable term policy may be helpful in the event something should happen to the child. This will make funeral expenses less daunting at a time when money should not be an issue. Finally, if you have more than one child, you should be sure to update all beneficiary designations for your own life insurance policies, 401(k), and other similar accounts. You may wish to name several successors or create a trust to act as the beneficiary of your policies. An experienced estate-planning attorney can best advise you on which option is best for you.