As a parent, there are legal and medical things to think about when your child turns 18 that are commonly overlooked. And advisors can add value by helping clients prepare for their child’s transition to adulthood.
“There are dramatic implications when a child moves from being a minor to being an adult," says Henry P. Johnson, president and CEO of Fiduciary Trust Company International in New York City, the private wealth management arm of Franklin Templeton. "As an advisor, there is a checklist you should go through with your client who is in this situation.
"I started thinking about this more seriously this year because my son is going away to college in the fall and he will not have the support system he has here. But the real issue is he is turning 18, and in the eyes of the law he is an adult."
Without the proper planning, Johnson says he would not have the authority to act on behalf of his son if something happened to him while he is away at school. The same is true for all parents of adult children.
Several documents need to be in place: a durable or temporary power of attorney, a health care proxy, a HIPPA release form, a financial will and a living will. Without these, the law of unintended consequences could take over, Johnson says.
For instance, if your adult child has a bill that needs to be paid quickly or a lease has to be signed, the parent can do it if a power of attorney has been executed. Time limits can be put on power of attorney, or exceptions can be included in the document if the parent or child wants.
Assigning a health-care proxy or medical power of attorney allows the parent to act on the child’s behalf in a medical emergency. Signing a HIPPA release form allows the parent or others to obtain medical information about the adult child that would otherwise be withheld because of the child’s privacy rights.
“It is important that the child and parent agree on what information the parent would have access to and when medical decisions should be made by the parent for the child,” Johnson says.
Both a living will and a financial will should also be part of the planning for the child, he adds. The child may have very different ideas about the details of a living will than the parent. And without a financial will, the child’s assets will automatically revert to the parents if the child dies, which may not be what the child wants.
“The process of filling out these forms can be the basis for meaningful conversations between the parent and a child,” Johnson says.