by Kathy Sablone, JD, AEP®, Co-Chief Planning Officer
by With summer winding down, and children returning to school, we wanted to provide a timely reminder that now is the perfect opportunity to review or create an estate plan for your adult children.
It may be hard to believe but, when a child or grandchild turns 18, he or she is now considered an “adult” in the eyes of the law in Massachusetts and many other states. Although you may still view them as a child (and they may still act like one at times), you need to put in place some essential documents so that you can help in the event that something unexpected happens.
Every child over age 18 should have a health care proxy and durable power of attorney naming a parent (or parents). If your child is ill or has been in an accident, you will want to be kept informed. If you are not named as a health care agent, a hospital cannot legally discuss your child’s condition, let you make any health care decisions, or even confirm that your child is receiving care.
A health care proxy names someone to make medical decisions if your child is incapacitated. The health care proxy should include a reference to the Health Insurance Portability and Accountability Act (HIPAA) that allows the agent access to medical records. A properly executed health care proxy and HIPAA release will allow your child’s doctors to discuss privileged medical information with you and give you the power to make decisions regarding treatment. It also gives you the authority to contact insurance companies on his or her behalf. If your child is attending school in a different state, you should consult with your attorney to determine whether you need a separate health care proxy for each state.
Similarly, it is important to have a durable power of attorney for financial matters. Even if you are the one paying the college tuition, you are not legally allowed to manage your child’s money or communicate with his or her financial institutions. Your child may become incapacitated or simply be unavailable if attending school in another state or participating in a study abroad program. A power of attorney permits you to access bank accounts, file tax returns, deal with student loans or other creditors, speak to the financial aid office, and handle any other financial issues that may arise.
If an adult child is incapacitated and does not have a health care proxy or power of attorney in place, then your only recourse will be to go to court to obtain a Guardianship and/or Conservatorship. This involves a public process that can be expensive and time consuming. In contrast, these basic documents are straightforward and can be prepared by your estate planning attorney relatively quickly and at a much lower cost than a court proceeding.
In addition to a health care proxy and durable power of attorney, some adult children may also need a will. If your child owns significant assets in his or her name, then he or she should sign a will to name a personal representative to settle the estate and decide who should receive those assets. If your child does not have a will, the assets pass according to your state’s intestacy statute. Typically, that means the assets will go to the child’s parents, which may negate your own estate planning.
As a parent, you hope that you will never need to use these documents, but they are vital in an emergency. Please contact your Boston Financial Management advisor or a member of BFM’s Estate and Financial Planning group if you would like more information about estate planning for your adult child.
Important: This alert does not contain any legal or tax advice. You should always consult with your attorney, accountant or other professional advisors before changing or implementing any tax, investment or estate planning strategy.
IRS Circular 230 Disclosure: Pursuant to IRS Regulations, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax related penalties or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.