Has your child just graduated from high school and is heading off to college in the fall? Over the next few months, you and your child will likely be busy making arrangements for transportation, housing, food, classes, a campus bank account, and buying necessary equipment and supplies. While these are all important things to do, one of the most important things you should also do is to help your child to establish a basic estate plan.
Students (and other young adults) over age 18 need some basic estate documents. This is because while the law recognizes them as adults, they often still need some assistance (just like the rest of us). Getting your child a financial power of attorney, a health care directive and a waiver of HIPAA (Health Insurance Portability and Accountability Act) can provide them with a safety net as they make this transition into adulthood.
- Financial Power of Attorney. Students are busy and often need help managing their bank, UTMA, 529 plans, or other financial accounts. They might also sometimes need assistance making required payments in a timely manner. However, now that your child is age 18, you, as a parent, no longer have legal authority to manage your child’s bank and/or investment accounts unless you are also named on those accounts. In addition, you do not have legal authority to deal with your child’s creditors (such as cell phone providers, credit card companies or insurance companies) or to access your child’s financial records (such as the student’s tuition and housing accounts). Oral approval by the student for access to on-line accounts, or to deal with creditors, is not legally sufficient for dealing with third parties.
A financial power attorney can grant the parent the ability to handle any and all financial issues arising for the child while he or she is at college. While my own children attended college, we were able to assist them periodically using a power of attorney when the child’s own busy schedule, or lack of experience, could have caused credit or other problems for the child.
- Advance Health Care Directive. Most parents mistakenly assume they can continue to make medical decisions for their children as long as those children remain “dependent.” On the contrary, once a child attains the age of 18 years and graduates from high school, only that child (now a legal adult) has the right to make these decisions. A medical power of attorney is therefore an essential document for any student headed off to college.
An Advance Health Care Directive (AHCD) allows the child (the “Maker”) to express his or her desires regarding medical care and end-of-life medical decisions. The document also names someone else (the “agent”) to give instructions to doctors and other care providers for the Maker if he or she is unable to do so. Without an AHCD, parents may be unable to obtain information about their adult child’s medical condition in the event of an accident or serious illness. Moreover, treatment for the adult child may be delayed or care provided that is inconsistent with the child’s desires.
When our son shattered his elbow in a fall, the day after his 18th birthday, his AHCD gave my husband and me the legal power to work with his doctors to determine the best medical treatment options and to make decisions for our son during and immediately after the emergency surgery that followed.
- Authorization to Release Medical Information. Another critical medical care document we recommend is an Authorization to Release Medical Information (also called a “HIPAA Waiver”). Under current federal and California law, health care providers are prohibited from discussing an individual’s sensitive medical information without the express consent of the patient. A HIPAA Waiver provides that express consent in advance, in case the child is too ill to grant it when needed. Simply put, a HIPAA waiver would allow parents to obtain information about a sick or injured student to help the parents to make better decisions regarding the adult child’s care.
In addition, a HIPPA waiver is essential if the parent is to deal with medical bills incurred by the child. For example, if the adult child was injured and received care at a hospital near the university, the parents could obtain copies of the bills so they could be paid while the adult child recovers. Having used a HIPAA waiver for this myself, I can assure you that having this document significantly reduced the frustration when dealing with hospital billing agencies.
This critical document can be especially important if a child experiences a mental health episode. Mental health issues often present between the ages of 18 and 24, when young adults are away from home. According to the National Institute of Mental Health, in 2021 young adults aged 18-25 years had the highest prevalence of “any mental health” issue (33.7%) and “serious mental illness” (11.4%), compared to adults aged 26-49 years (28.1%, and 7.1%) and adults aged 50 and older (15.0% and 2.5%). https://www.nimh.nih.gov/health/statistics/mental-illness
With an Advance Health Care Directive, a HIPAA waiver, and a financial power of attorney, parents can accompany the adult child to the mental health care facility, assist with the admissions process, ensure their child receives the kind of care he or she desires, and deal with the medical and other bills while the adult child receives needed care.
- Optional documents. Additional documents which the adult child may want include a Will, and if appropriate, a trust. Without a Will, the laws of the state will control who inherits the young adult’s assets (and has authority to deal with the child’s assets and bills). Under California law, the assets of a childless person who dies intestate (i.e., without a Will) are distributed first to the parents (equally), then to the child’s siblings, and finally to more remote family members. If the adult child wishes to change this distribution plan, a Will is required.
So long as the value of the adult child’s estate is valued at less than $184,500 and does not include real property, the assets can be transferred to the heirs through the use of a “small probate process” that does not require going to court. If the young adult’s assets exceed $184,500, however, or he or she owns an interest in real property, a trust should be considered.
Being prepared for financial and medical issues can provide peace of mind to both young adults and their parents. If you have an adult child headed off (or back) to college in the fall, we recommend you and your child consider adding an estate plan to your preparations. We would be happy to work with you to prepare this plan.
