Preparing to Launch – Legal and Financial Considerations of Parenting Newly Adult ChildrenAugust 2019
As your newly adult child prepares to go off to college or otherwise live independently, there are a few important legal documents that can ensure you are able to be there for your child when needed most.
Health Care Directives and Powers of Attorney
By executing a health care directive, your adult child can appoint you to make health care decisions on his or her behalf in the event he or she is unable to do so. Your child also can authorize you to receive the otherwise confidential health information necessary to make informed health care decisions on his or her behalf. Additionally, your child can provide instructions regarding certain medical treatments he or she would like to receive or decline in cases of serious illness or injury.
In addition to planning for his or her healthcare, your adult child should also consider executing a power of attorney appointing you as your child’s agent for his or her financial and legal affairs. Unlike a healthcare directive which authorizes you to act only when your child cannot, a power of attorney may enable you to act on your child’s behalf even while he or she is competent (e.g., while your child is traveling abroad), without diminishing the actions your child can take for himself or herself. Because powers of attorney often grant broad authority, they are incredibly useful (e.g., executing leases and other contracts, preparing tax returns, interacting with various government agencies and accessing banking and other financial information). However, that same breadth of scope makes it imperative that your adult child understand the financial and legal implications of executing such a document and that you and your child reach a clear understanding regarding the intended use of such authority. (At a minimum, the law requires that you exercise such authority in the best interests of your child.)
As the legal requirements for health care directives and powers of attorney vary from state to state, it is best practice to execute a set of such documents for each state in which your child will reside.
Start Saving for Retirement
Now is a great time to help your adult child begin learning about financial responsibility. If your child has earned income from a summer job or paid internship, he or she may be eligible to begin saving using a tax-advantaged retirement savings accounts such as a Roth IRA. We suggest setting up a meeting between your child and your trusted financial advisor to provide your child with some foundational financial literacy, a lesson on the power of compounding returns and an opportunity to begin setting his or her own financial goals.
Transitioning Custodial Accounts
Finally, this may be the time to revisit any custodial accounts created for your child and to plan for the termination of such accounts and the transfer of account assets to your child. Custodial accounts are generally required to terminate when your child attains the age of 18 or 21, depending on the state in which the account was created and the terms of the account. Until your child attains the required termination age, the assets of the custodial account can continue to be expended by the custodian for your child’s benefit. Once the child reaches the termination age, the account title should be changed to the child’s name.
There are many challenges in helping a child successfully navigate the transition from adolescence to adulthood. While it is important to encourage responsibility and independence, thankfully, there are ways parents can continue, when necessary and appropriate, to act on their child’s behalf.
If you would like to discuss how to best prepare for your child’s legal independence, please contact one of the members of our Trusts and Estates Department listed below.
© 2019 Herrick, Feinstein LLP. This alert is provided by Herrick, Feinstein LLP to keep its clients and other interested parties informed of current legal developments that may affect or otherwise be of interest to them. The information is not intended as legal advice or legal opinion and should not be construed as such.