Once your child turns 18, you no longer have the same parental authority in the eyes of the law. It’s important to make sure your adult child has the necessary legal and financial protections in place and is ready to make informed decisions about the future. The following tips can help.
Prepare the Necessary Estate Planning Documents
You may be surprised to learn that even 18-year-olds need estate planning documents in place to protect their interests and prepare for the future. Estate planning for your young adult should include the following documents.
• Financial power of attorney
A financial power of attorney allows your child to designate an individual to manage his or her financial affairs in the event of injury or incapacitation. Without this document in place, you may have trouble accessing your child’s accounts, paying bills and loans, etc.
• Healthcare power of attorney
A healthcare power of attorney allows your child to designate a trusted individual to make medical decisions on his or her behalf. This is an important protection to have in place in case an accident or injury renders your child unable to communicate. Without a healthcare power of attorney, you may not be able to make medical decisions on behalf of your child.
• HIPAA authorization
The Health Insurance Portability and Accountability Act (HIPAA) protects the privacy of patients by restricting the medical information healthcare providers are authorized to share with unauthorized persons. To grant permission for you to receive medical updates, your child will need to sign a HIPAA authorization designating you as an authorized individual.
Update Your Insurance
Consider how your child’s status as an adult may impact your risk exposure and take steps to help ensure you have the proper insurance in place.
• Health insurance
Children can typically stay on their parents’ health insurance policy until they reach age 26. If you choose to continue covering your child under your current plan, it’s important to make sure your child has access to in-network coverage, especially if your child moves out of state for college or work. It may be more cost effective to explore other options, such as an employer-sponsored health insurance plan (if your child is employed), a student health plan (if your child is attending college) or an individual plan purchased on the health insurance marketplace.
• Homeowners/renters insurance
If your child is living in a dorm, you may need to reevaluate your homeowners insurance policy to make sure your child’s property remains covered. If your child resides in an apartment, he or she may need to purchase renters insurance.
• Car insurance
Consider whether your current car insurance remains adequate to cover your adult child’s needs. In many cases, keeping an 18-year-old on the family’s auto insurance policy is more cost effective than purchasing an individual policy. If your child attends college and doesn’t bring a car, you may be eligible for a distant driver discount, which has the potential to significantly reduce your rates.
Help Your Child Register to Vote
In addition to achieving personal independence, turning 18 marks a milestone in your child’s civic development. Encourage your young adult to register to vote, and share your values regarding civic responsibility.
Have Your Child Authorize the Sharing of Academic Records
The Family Educational Rights and Privacy Act (FERPA) protects students’ educational records. Without express written permission, you won’t be able to access your adult child’s academic records — even if you’re cutting the tuition checks. Make sure your child signs a FERPA release to grant permission to you and/or another trusted individual to access his or her academic records.
AJ Kratz, CFA, CFP is a Private Wealth Manager and Partner with Creative Planning. Creative Planning is one of the nation’s largest registered investment advisory firms providing comprehensive wealth management services to ensure all elements of a client’s financial life are working together, including investments, taxes, estate planning, and risk management. For more information or to request a free, no-obligation consultation, visit CreativePlanning.com.
This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.