Graduation is a busy and emotional time for parents and their children, especially if the child will be going off to college or moving away. Parents may not realize, however, that turning eighteen is even more life-changing for their child than moving into a dorm room or registering for college classes. The milestone of graduation is the ideal time for you to reach out to clients, leads, and referral sources to help parents and their graduates adapt to the legal realities of adulthood. Read on to learn more about how estate planning for young adults can give the entire family peace of mind.
Myths About Estate Planning for Young Adults
Your clients may not realize how much things change from a legal standpoint upon their child’s eighteenth birthday. You can help them unravel the myths and misunderstandings regarding estate planning for young adults.
Myth No. 1: Parents Retain Access to Their Child’s Health Information
Most parents cannot imagine losing access to their child’s healthcare information. After all, a child’s health is typically their parent’s top priority. Once a child turns eighteen, however, they become a legal adult. That means the child needs to sign a Health Insurance Portability and Accountability Act (HIPAA) authorization if the child wants a parent to retain access to their health information—even if the parent’s health insurance plan still covers the child and the parent pays for care.
When most people talk about HIPAA, they are referring to its privacy rule. To ensure that doctors can continue to share health information about young adult children with parents, the best practice is for the adult child to sign a HIPAA authorization form.
Myth No. 2: Eighteen-Year-Olds Do Not Need an Estate Plan Because They Are Young and Healthy
An eighteen-year-old is an adult who is technically responsible for their own financial, legal, and health-related decisions, so adult children need proper documentation if they want their parents to help them manage their affairs. Every young adult can benefit from having at least a basic estate plan that includes health-related documents to allow the free exchange of information, set out the young adult’s wishes with regard to healthcare, and name decision-makers in case of incapacity.
In addition, some seemingly simple acts such as a parent accessing their child’s bank account while the child is away at college require the child’s affirmative grant of legal permission. Other instances in which a child might want or need their parents to be involved are more dire, such as if the child becomes physically or mentally incapacitated after an accident. A durable financial power of attorney can allow a parent to help with financial matters and decisions for their child in such situations.
If a power of attorney is not designated, court intervention may be needed to grant a parent or other family member permission to handle the child’s medical and financial affairs. This is sometimes referred to as a living probate, during which loved ones must petition the court and receive court appointment as a guardian or conservator over an adult child. Having an estate plan with powers of attorney for medical and financial decisions as well as other healthcare documents can ensure a relatively seamless transition into adulthood while legally allowing parents to continue helping their children.
Myth No. 3: Young Adults with Few Assets and Little Money Do Not Need a Will
Some clients think a will (or trust) is only for the very wealthy. A young adult might not have a lot of wealth, per se, but having a basic will can still benefit them—or, more accurately, their loved ones, who would be left to sort out the child’s affairs if the child dies unexpectedly. Probate (the process in which a decedent’s affairs are wound down and their assets are distributed to heirs or beneficiaries) can be a time-consuming and expensive undertaking. This can add to the stress that a mourning family is already experiencing.
Having a will allows a young adult to appoint a personal representative to handle postdeath administration of their estate, including settling debts, handling any lawsuits of the decedent (including a wrongful death action), and distributing their property and money (i.e., checking and savings accounts, personal property, etc.). Having a will may alleviate and shorten the probate process compared to the process a court undertakes when a person dies without a plan in place.
Reaching Out to Young Adults and Their Parents
The transition to adulthood can be an emotional time. The young adult is excited about new possibilities but also overwhelmed with new responsibilities. Parents may deal with the classic symptoms of empty nest syndrome, which can include feeling a lack of purpose, a loss of control over their child’s life, emotional distress, and anxiety over their child’s well-being.
While you may need to navigate such delicate emotions carefully, you can help empower young adults and their parents through proactive planning. Reach out to clients or prospects who have children entering young adulthood. You can offer them a free consultation, pointing out that they may not know some of the legal ramifications of adulthood. You can also discuss this topic on your blog or social media channels, and reach out to your referral network about this topic that likely impacts many of their clients.
Learn About Planning Considerations for Children
Expand your knowledge of the special planning considerations for young adults by watching WealthCounsel’s on-demand webinar, “Helping Parents & Grandparents Plan for Minor Children.” Presenter Jay Zych, JD, discusses how parents and grandparents can leave assets in trusts for their descendants. He also discusses design options such as trusts for minors, demand trusts, and health education exclusion trusts. Click here to watch it.