Now that the kids have settled into their college routines, and perhaps are even getting ready to come home for a holiday visit, it may be a good time to think about the important estate planning documents that every adult should have. You’re probably thinking, "Estate planning? My kid has no assets! What kind of estate planning could he or she possibly need?"
However, there’s a lot more to estate planning than creating a Will or distributing assets. Once your child turns 18, there are some important documents that you will need to protect yourself and your loved ones. A basic estate plan for your 18-year-old includes documents that will allow you to make important medical and financial decisions on behalf of your child, should the need arise.
Health Care Proxy
Everyone who is 18 or older should have a Health Care Proxy. Although you may think of them as children, if they are 18 or older they are considered adults by law in Massachusetts. As such, they are entitled to medical and financial independence, as well as privacy — even from you. If your child suffers physical impairment or injury at home, at school, or while traveling, it is crucial that you have immediate access to information regarding his or her condition and/or diagnosis, thereby allowing you to make any major decisions regarding your child’s care.
Without a Health Care Proxy, a hospital, by law, cannot discuss your child’s medical issues with you if your child is 18 or older. The last thing parents with a child in crisis need to hear is that information about their child cannot be shared due to confidentiality issues and privacy rights.
The Health Care Proxy is a document that appoints a person of your child’s choosing, usually a parent, to make important health care decisions on his or her behalf if your child is physically and/or mentally incapacitated. Your child’s chosen agent will have the power to make important medical decisions, including approving treatment options and medications to be administered.
The Health Insurance Portability and Accountability Act (HIPAA) authorization is what allows the named agent under your child’s Health Care Proxy access to vital medical records. Without a proper release under HIPAA, your child’s physician may not discuss his or her privileged medical information, even to a named health care agent under a Health Care Proxy. Most often, a well-drafted Health Care Proxy contains the necessary HIPPA release language within its terms. This document will also allow your child’s named agent to contact doctors and insurance companies, as well as deal with medical billing issues on his or her behalf.
Usually, a Health Care Proxy contains a Living Will, or life support statement. This statement is intended to assist the appointed agent concerning a person’s wishes regarding extreme measures and certain other life support decisions. Though not legally enforceable in Massachusetts, many people choose to have a Living Will prepared to serve as a guide for their named agent. Whether or not this particular document is legally binding, it is still important to have a healthy dialogue regarding one’s feelings toward the different treatment options.
It is a good idea to provide copies of the Health Care Proxy to your child’s college health clinic and primary care physician.
Durable Power of Attorney
A properly executed Durable Power of Attorney ensures that your child’s financial affairs, big or small, are properly, privately, and easily managed in the event that he or she is unable to handle them personally. When a child becomes incapacitated, temporarily or in a more permanent way, it is crucial to ensure that as parents, you are able to step in and handle his or her financial affairs.
You may need to deal with bank and investment accounts, lease agreements, credit card companies, student loans, filing of taxes, and a variety of other personal financial matters on your child’s behalf. In order for third parties to work with you regarding such matters, your child must first execute a Durable Power of Attorney appointing you as his or her attorney-in-fact.
Absence is another important reason to obtain a Durable Power of Attorney. Students often travel to schools all around the country, and study abroad programs take students to all parts of the world. It is essential to ensure that someone at home can transfer assets, access bank accounts, speak with creditors and school finance departments, and handle the many other issues that may arise on behalf of an absent child.
If your child opposes providing you with uninhibited access to his or her financial matters, a Springing Power of Attorney may offer the same protection, but will only "spring" into power when accompanied by proper documentation that is provided in the terms of the Power of Attorney. Often, a Springing Power of Attorney requires a doctor’s statement regarding the incapacity of the individual to accompany the Power of Attorney in order for it to be activated. The disadvantages of the Springing Power of Attorney are that third parties may be reluctant to rely upon the document, it may not be useful in a situation involving absence, and it may become cumbersome and expensive to continuously obtain an updated doctor’s statement.
The Family Educational Rights and Privacy Act (FERPA) is a federal law that protects a student’s rights and restricts third parties, including parents, from access to their student records. Many colleges and universities have their own release forms and waivers regarding student records, which, along with the Durable Power of Attorney, should be reviewed and executed as soon as possible.
It is a good idea to provide copies of the Durable Power of Attorney to your child’s financial institutions, financial aid office, and anyone else you feel is important.
Guardianship and Conservatorship
If children or family members over the age of 18 become incapacitated and they do not have a Durable Power of Attorney and Health Care Proxy in place, then their family will be forced to pursue a Guardianship and/or Conservatorship over them.
On July 1, 2009, the Uniform Probate Code came into effect for Guardianship and Conservatorship matters. A Guardianship is the court-appointed authority over a person’s physical being, including one’s medical needs, and a Conservatorship is the court-appointed authority to handle someone’s financial needs. The changes in the laws affecting these proceedings are intended to tighten up the process of obtaining a Guardianship and/or Conservatorship over a disabled individual, which means that an already difficult and invasive process is now even more so.
The process of obtaining a Guardianship and/or Conservatorship is a time consuming, expensive, and often slow process. The detailed information required by the court becomes public record and can often contain private information regarding family members and family relationships, as well as financial and medical information. The court must approve major decisions made by Guardians and Conservators, and monitors their activities with regular reporting requirements on at least an annual basis.
Will and Trust Instruments
Most college age children have nominal assets and have no need for a Will or Trust. However, if your child does have assets and it would negatively impact your own estate planning if your child’s assets were to revert back to you upon his or her death, then a Will or Trust may be an important planning tool. It may be more appealing for a child’s assets to pass to his or her siblings or directly into a Trust. A Revocable Trust may also be an easy and efficient manner of handling the management of investments held in a child’s name. Assets held in trust also avoid probate.
Many children name their parents as co-attorneys-in-fact as well as health care agents, so that they can share the information, responsibility, and management of any health or financial issues that may arise due to the child’s absence or disability. In the case of divorced or complex family dynamics, the documents can ensure that the child’s wishes regarding the involvement of the parents or step-parents is respected. This may avoid an ugly court battle if there are different family members with differing opinions.
If you do not have these basic documents in place, then now is a good time to set an example and ensure that you and every family member over the age of 18 has a Health Care Proxy and Durable Power of Attorney.
The next time your child comes home for a long weekend or school break, consider speaking with your attorney ahead of time to get these important documents prepared for your family.