Children and Estate Planning

Graduation time is upon us, and you have a kid leaving the nest and turning 18! How did this happen? When your child turns 18, they’re legally considered an adult even though you may feel they have a lot more growing to do, but they will likely argue this point!  Just like any other adult, your child’s  health and financial information is protected by privacy laws. Despite this, they are still your children, and you want to be there to support them in a crisis. Unless you’ve preemptively planned, you won’t be able to step in and support them.

As an estate planning attorney, I often see families caught off guard when I tell them this. Like those families, you may also assume that as a parent, you’ll always have a say in your child’s medical and financial matters. But you don’t. Under the law, you have just as much access to their medical and financial information as you do for Joe down the street (which is none).

The good news is that with proper planning, you can help your freshly anointed adult child navigate this transition and ensure you’re able to step in if something happens. Here we will share three techniques for helping the transition to adulthood. Children and estate planning are important, even after they have become adults.

 

Teach Your Children Well

The first proposal for a successful transition to adulthood is education. We believe education is the first step in every conversation we have here at the firm. Why not bring that into your personal relationships? The more education you can relay to your child about their new financial and legal responsibilities, the more empowered they will be to make mature choices.

Talking about finances with your child can be daunting, and if you haven’t already, the time is now. Start with keeping a budget and setting aside funds for emergencies or unexpected expenses. Explain the importance of tracking their income and expenses, setting financial goals, and investing wisely, both now and for the future.

Help them understand the basics of banking, such as how to use checking and savings accounts, the benefits of maintaining a good credit score, and assist them in setting up their own bank account if they do not already have one. Explain the pitfalls of overdrafts and the importance of keeping accurate records. Share with them how to access credit and use it responsibly. Explain how credit cards work, the importance of paying off balances in full each month, the necessity to pay on time, and why a positive credit history can greatly impact their future abilities to purchase cars, a home, or start a business.

And don’t forget your child now has tax obligations. Teach them how to file taxes, what documents they need, and how to understand their W-2 forms, or what it means to be a 1099. Explain the importance of keeping accurate records and how to navigate basic tax software.

Health care is another critical area where your child needs education. Let your child know that you cannot make medical decisions for them and you will not have access to their health records anymore – unless they expressly designate you. We will cover more of the important documents needed later on in the article.

 

Open & Easy Communication

Adulthood often involves having difficult conversations, don’t we know it! Two of those conversations with your child are about their healthcare and financial decisions in an emergency.

Try to facilitate an open conversation about what your child would want to happen in various medical scenarios. If they became incapacitated, who would they want to make decisions on their behalf? Would they prefer one parent over the other? Maybe they want a sibling or other family member to be their designated contact. Be open to the possibilities that they have other people in their life and may want to include them. Be grateful they are comfortable talking with you about it.

Do they know what a ventilator is and whether they would want one if it became an issue? What about a feeding or hydration tube? And what about DNR? It is uncomfortable, but vital, to talk about these things so your child’s wishes are honored. Who would they want to have access to them, in case of an accident or an illness? Once you know the answers to these questions, you can help your child create a health care directive and medical power of attorney.

Have the same conversations about finances. Do you know about all their financial accounts? If they are, how will you access their account to stop tuition payments or housing payments if necessary? Will you be able to access their checking account if bills need to be paid? Your child may be hesitant to discuss these matters with you but assure them you have no intent to violate their privacy or take over their financial decisions. You simply want to be there for them, if needed.

 

Never too Early for Legal Planning

Once these tough conversations are had, emphasize the need to get a legal plan in place so their wishes are properly documented and honored. At the very least, your adult child’s legal plan should include the following documents:

Health Care Proxy and Advance Directive. A health care proxy grants someone, usually you, the authority to make medical decisions on your child’s behalf if they cannot. An Advance Directive complements this by outlining their medical treatment preferences in various scenarios, ensuring their wishes are respected even when they cannot voice them.

HIPAA Authorization. The HIPAA Authorization is equally important. HIPAA (Health Insurance Portability and Accountability Act) is designed to protect patient privacy, but it can also prevent you from accessing your child’s medical information without their explicit permission. By signing a HIPAA Authorization, your child can ensure that you can speak with doctors and receive updates on their condition.

Living Will. A Living Will is another important document to consider. This outlines your child’s wishes regarding end-of-life care, such as whether they want to receive life-sustaining treatments. Having these preferences documented can provide ease and comfort during an otherwise trying time.

Power of Attorney. A Power of Attorney allows your adult child to appoint someone (again, usually you) to manage their financial affairs if they are unable to do so. This can include everything from paying bills to managing bank accounts and handling investments. Without this document, you might find it difficult to step in and help when needed.

It may also be important for your adult child to have a plan in place for what happens after death. If that is the case, they need a will or trust. This is something no parent wants to think of, but we can help you navigate these decisions and put everyone’s mind at peace.

Finally, life circumstances will change, let your child know how important it is to review their documents regularly and update them as needed. Encourage your child to revisit their decisions periodically, especially if they experience significant life changes such as getting married, moving to a new state, or starting a new job.

We’re Here to Help

Hopefully, we have helped to clear up; children and estate planning. Understanding the technicalities and nuances of your child becoming an adult are important for everyone involved. We create personalized estate plans that honor your (and your child’s) wishes, safeguards loved ones and keeps the whole family in the loop. We offer a 30- Minute meet and greet consultation for new clients. Planning ahead brings peace of mind for your entire family. We are here to help—call (480) 525-6244, email us, or visit our website for more information.