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Headed Off to College? Pack an Estate Plan

Mark Smith, CFP®, CPA/PFS, CIMA® - Thursday, July 20, 2017

College Students Need an Estate Plan | M.J. Smith & AssociatesEven though summer is at its peak, many parents and their teenagers are thinking ahead to the start of college. Open any newspaper circular, and you’ll find everything your son or daughter needs, from comforters to laundry hampers (which we all know will find their way back to your washing machine!). However, as you help your teenager prepare for the school year, don’t forget to pack one very important item – an estate plan.

“An estate plan? Why would a teenager need an estate plan?”

In Colorado, the age of majority is 18, meaning that 18-year-olds have reached the age where they are considered adults under Colorado law. While they still aren’t old enough to drink, 18-year-olds are old enough to enter into legally binding contracts, to sue or be sued, to make decisions regarding their own bodies, and to consent to medical treatment. In short, they are now responsible for their own medical and financial records, and you may not be able to help your child in an emergency unless he or she has an estate plan.

Here is a hypothetical example: Your daughter, Anne, is a freshman at the University of Colorado. During football season, she heads to a party after a game with some friends. As she and her roommates are driving back to their apartment, a drunk driver hits their car, severely injuring Anne. One of her friends calls you to tell you she’s hospitalized and unconscious.

Your first reaction might be to call the hospital to find out Anne’s condition. But Anne is 18, and because she is an adult, the hospital can’t release information to you. Frustrated, you rush to the hospital to speak with her doctor – but again, Anne’s doctor can’t talk to you about her condition until she regains consciousness and provides her permission.

Three simple estate-planning documents could help you avoid a traumatic situation like this one. At a basic level, Anne should have:

  • Financial Power of Attorney. This could be especially helpful if Anne’s injuries kept her unconscious or incapacitated for a longer period of time. With financial power of attorney, you could pay her bills, access her bank accounts, or contact her landlord regarding her lease.
  • A Health Insurance Portability and Accountability Act (HIPAA) release. If Anne had signed a Personal Representative Form, you would have access to Anne’s protected health information. (A notarized Durable Power of Attorney document would also work in this case.)
  • A Health-Care Proxy. In Colorado, no one has automatic authority to make decisions for another adult in a medical emergency unless he or she is the designated “proxy.” In Anne’s case, a health-care proxy would enable you, as a parent, to make decisions about Anne’s medical treatment.

These documents are a good start to help your children (and you) manage their affairs as they start their adult lives. However, as life gets more complicated for your kids, they may also want to consider creating a basic will, purchasing a life insurance policy, identifying beneficiaries for bank accounts or a 401(k), and creating a list of social media accounts (with login information) to help a trusted individual manage or terminate those accounts, if needed.

At M.J. Smith & Associates, we’re strong believers in helping our clients become good stewards of their financial affairs – and that includes helping them prepare for the worst. If you have questions or would like to talk to us about your estate plans, we’d be glad to help. Contact us today to schedule a complimentary, no-obligation appointment.

 

 

Raymond James Financial Services and its advisors do not provide advice on legal issues, these matters should bediscussed with the appropriate professional.

 

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