You’ve finally made it, your adult children have graduated high school. It’s a big moment for the whole family. All your hard work as a parent has finally paid off. Now that your adult child is 18+ they’re considered an adult in the eyes of the law. It’s important for parents to talk about their financial and estate planning decisions with their adult children. Prepare your adult child with financial and estate planning literacy that can help protect them throughout their life. In this article, I’ll share financial and estate planning documents that are important to consider before your young adult children venture out on their own.
As parents, when our children leave the nest and start making their own way, our influence on them fades. After all, 90% of the time we spend with them is before they reach the age of 18. You may feel the hardest part of your child-rearing years are behind you. Except now more than ever, that may not be the case.
When your teen becomes 18 years old, they may be ready to branch out and make their own decisions. And once they’re on their own, they’ll likely take on several financial responsibilities. Are your kids ready to be financially independent?
While your child is legally an adult, their financial journey is just beginning
Are they starting their first career, graduating high school, picking out a college, or finding an apartment of their own? Every step of the way, important financial decisions must be made before they head out on their own.
No matter how old they are, we always want the best for our children. Parents can be a resource of financial knowledge for their children succeed in life and achieve all of their dreams. It’s not too late to talk to them about how estate planning can help them reach their financial goals.
The importance of powers-of-attorney for college-bound young adults
Be aware of when planning your estate including powers of attorney, wills, and trusts (specifically living trusts). A power of attorney (POA) allows a legal agent, or fiduciary, to act on your behalf. This is necessary in case of medical directives, financial emergencies, and other special circumstances. Establishing a POA is an integral part of estate planning efforts. Read more about 5 Reasons and 5 Steps To Establish Medical Power of Attorney Today.
Do you or your loved one plan to travel overseas for an extended period of time? When accidents physically or mentally incapacitate you or a family member, who will act on your behalf? Having an agent working on your behalf, knowledgable of your choices is crucial to your long-term goals.
There are several types of POA and it’s important to determine which one fits you and your family’s unique needs. The two most common types are:
- Financial Power of Attorney
- Healthcare, Medical Power of Attorney
A financial POA, or durable power of attorney gives an agent power to act on your behalf in broad ways. They can handle your business interests and transactions, life insurance, bills, and trust payments. A financial POA can access and manage your child’s accounts to ensure they don’t incur bank fees from late payments.
A healthcare or medical POA appoints an agent for health and medical decisions. Medical POA is only enacted when you’re incapacitated or unable to make decisions yourself. With proper advance directives you can make choices that your agent will follow. The types of decisions advance directives can include are:
- choosing long-term care
- hiring caregivers
- choosing doctors
- medical decisions from treatment to medication
HIPAA doesn’t allow for complete decision-making authority. Advance directives offer your agent the opportunity to consider multiple educated opinions within your healthcare treatment plan.
Give the gift of asset protection
First, protect your adult children with powers of attorney. Next, decide how you’ll leave assets to your loved ones in your estate plan and avoid probate court.
When it comes to your young adult children, ask yourself these three questions:
- Are you planning to leave assets to your children or grandchildren?
- How much control do you want them to have over the assets?
- And how soon do you want them to take control of said assets?
If you’ve answered yes to any of these questions, consider establishing a trust within your estate plan. Trusts offer unique benefits to your beneficiaries that can set them up for success with the legacy you leave them.
First, these beneficiary trusts allow you to choose when and if your child can control these assets.
Second, any assets held in a properly drafted beneficiary trust is asset protected. In this case, your assets cannot be touched by a child’s creditors, nor a divorcing spouse. So long as the assets are held and managed in this trust for the child’s benefit.
With foresight you can make sure your children, adult children, grandchildren, and other dependents are financially sound. This way they can change their majors, move to a new city or state, and what if they need healthcare. No matter what they’ll be financially secure. Additionally, the assets put into the trust can be set aside for specific uses, including healthcare and education.
How to Talk to Your Adult Children About Finances While Offering Guidance And Support
As parents, it’s important to discuss these things early on with both partners and children. Get all the paperwork in order before they leave to start their own lives. This way you know that they’ll have financial security throughout their lives.
Establish this fiscal responsibility in a trust from an early age. Your children will have an understanding of the changing financial landscapes over time. As they grow and learn, so will you as their parent. It’s wise to make sure your estate plans continue to align with your family’s growth, additions, and changes over time.
As with all other aspects of estate planning, know what the best options are for you and your family. A knowledgeable representative will help you navigate the state and federal laws to do the best for your future generations. At Holman Law, we provide the ability to generate financial security for you and your loved ones.