Labor Day marks the unofficial end of summer. For many families, September also means sending children off to college, helping them settle into a first apartment, or watching them begin their first full-time job.
Estate planning for young adults may not be on the back-to-school checklist, but turning 18 brings an important legal change. Your son or daughter may still depend on you for tuition, health insurance, housing, and advice, but he or she is now legally an adult.
That means parents generally no longer have the automatic legal authority to handle an adult child’s financial matters, make healthcare decisions for the child, or obtain private medical information.
Fortunately, a young adult usually does not need a complicated estate plan. For most college students and young adults, the immediate priority is putting a few basic documents in place so that someone they trust can help if an emergency occurs.
Healthcare Power of Attorney
A Healthcare Power of Attorney allows a young adult to designate someone to make healthcare decisions if he or she is unable to make those decisions personally.
For many college students, the logical choice is a parent, with another parent or trusted family member named as an alternate. But once a child reaches adulthood, a parent does not automatically have the legal authority to make those decisions.
Consider a college student who is seriously injured in an automobile accident or becomes unexpectedly ill while away at school. The fact that a parent has always been responsible for the child’s healthcare does not necessarily give the parent decision-making authority after the child turns 18.
A properly prepared Healthcare Power of Attorney identifies who should have that authority if it is needed.
HIPAA Authorization
A HIPAA Authorization addresses a related but different issue: access to medical information.
Healthcare privacy laws restrict the disclosure of an adult patient’s medical information. That can come as a surprise to parents when their newly adult child has a medical emergency.
A HIPAA Authorization allows the young adult to identify the people who may receive information from doctors, hospitals, and other healthcare providers.
The distinction is important. The Healthcare Power of Attorney addresses who may make healthcare decisions, while the HIPAA Authorization addresses who may obtain medical information. A comprehensive plan should address both.
Durable Power of Attorney for Financial Matters
A Durable Power of Attorney for financial matters allows a young adult to authorize a trusted person to handle financial and legal matters when necessary.
Depending on how the document is prepared, that authority may include dealing with banks, insurance companies, landlords, educational institutions, government agencies, or other businesses and institutions.
Giving someone a Power of Attorney does not mean giving up control of your finances. The young adult remains in control of his or her own affairs. The document simply provides a mechanism for someone else to act when assistance is needed.
For a student attending college hundreds or thousands of miles from home—or studying abroad—that authority can be particularly useful.
Does a College Student Need a Will?
Not every 18-year-old needs a Will, but the question should not be dismissed simply because a young person does not own a home or have substantial savings.
Young adults may own bank and investment accounts, vehicles, cryptocurrency, valuable personal property, or other assets. Those beginning their careers may also have employer-provided life insurance, retirement plans, or other benefits.
A Will may be appropriate if a young adult wants assets distributed differently from the result under California law.
It is also important to review beneficiary designations on retirement accounts, life insurance policies, and similar assets. These assets generally pass according to the beneficiary designation rather than under the terms of a Will.
Does an 18-Year-Old Need a Living Trust?
Usually not.
A revocable living trust is an important part of many California estate plans, particularly for homeowners and people with substantial assets. But most college students and young adults do not yet own the types of assets that make a living trust necessary.
Estate planning should address a person’s actual circumstances. There is little reason to create unnecessary complexity for a young adult who primarily needs incapacity and emergency planning.
As life changes, the plan should change with it. Purchasing a home, getting married, having children, starting a business, or accumulating significant assets are all good reasons to review whether additional planning is appropriate.
A September Checklist for Parents of Adult Children
If your son or daughter has turned 18, this is a good time to ask whether he or she has:
- A Healthcare Power of Attorney;
- A HIPAA Authorization;
- A Durable Power of Attorney for financial matters;
- Current beneficiary designations on applicable accounts and benefits; and
- A safe and accessible place for important legal documents.
These are relatively straightforward steps, but they can make an enormous difference when a family is dealing with an unexpected illness or emergency.
Estate Planning Begins Before You Have an “Estate”
Estate planning is not only about deciding what happens to property after death. It is also about planning for the possibility that you may need someone else to act for you during your lifetime.
For young adults, that is often the more immediate concern.
September is a natural time for families to address these issues. If you have a college student or young adult child who has recently turned 18, consider adding basic estate planning to the list of things to take care of as he or she begins this next stage of adulthood.
The Law Office of Maureen Lyons, PC assists individuals and families with estate planning throughout California. Contact our office if you would like to discuss the appropriate planning documents for a college student or young adult.