Put away your hankies parents! Now that graduation is over, it’s time to get your child set up for the real world. I am living through this in real time, as our daughter, Claire, turned 18 in February, and graduated on June 7th. It’s not ‘fun’, but it is critically important for them, and you, that you get a few things done now. It’s been said that an ounce of prevention is worth a pound of cure. Perhaps it could just as easily be said that being proactive in addressing these issues before they arise will increase your peace of mind. Here’s a checklist of important documents and transitions that need to be addressed now that your child or grandchild will be moving into the adult sphere.

  • Power of Attorney for Medical Care
    • If your child cannot speak for herself/himself after an accident or illness, the medical community will not speak to you unless the young adult has given you Power of Attorney for Medical Care.
    • HIPAA – they should also sign a HIPAA waiver, allowing you to have their medical information (sometimes this waiver is incorporated into the POA mentioned above).
  • Power of Attorney for Business
    • If you need to sign your child’s tax return, or get access to their business information (e.g., bank accounts) for any reason, you need a durable power of attorney.
  • Will and Trust
    • At a minimum, have a simple will drawn up now; it can be updated later. The will names who she wants to settle her affairs. Perhaps your Mom gave your daughter a special ring; your daughter could list who she would want to have the ring at the back of her will. 
    • If your family has a more complicated situation, perhaps a Trust is important. To explore creating a trust, speak to your attorney.
  • Titling on Accounts*
    • Custodial - Maybe your parents gifted some money to your child several years ago, so they could learn to invest. If a parent or a grandparent is a “custodian” on the account, the custodian role goes away when the child reaches age of majority. Age of majority varies by state, but typically ranges from 18-25. If you're thinking of putting your name as the second/joint owner of the account, you want to consider varioius estate planning and asset laibaility issues before doing so. Due to these complexities, we often recommend adding yourself as the power of attorney for your child. 
    • Investment and bank accounts – As mentioned above, during the next four years, it may be helpful to consider becoming their power of attorney.
  • Fund Roth IRA/Start saving early
    • If they have had summer jobs, or worked during high school, and have employment compensation, they can contribute to a Roth IRA.
    • The money in a Roth IRA grows, and is not taxed (under the current laws).
    • If you really want to encourage them, you can match their contribution.
    • Help them understand how important it is to start investing early. The chart below lends some clarity to the impact of early saving/investing:

Source: lifehack.org

  • Start Building Good Credit – We were advised by a banker to have Claire apply for a store credit card like Nordstrom, Macy’s, or Kohl’s. She applied and got a Nordstrom card within 5 minutes. We looked at all the paperwork and she understands that she must pay the card off every month, if she uses it at all.
  • Medical Care
    • Have them make their own doctor’s appointments, and learn about health insurance and making payments for appointments
    • It’s also likely they will have to complete health forms for college. This is their responsibility if they are 18. I sat with Claire, but made her read through and fill out the forms.
  • Under the Family Educational Rights and Privacy Act (FERPA) - Once your child turns 18, you cease to have access to academic reports. If you want to see grades, talk it over with your child, and see if their college/university has a release form.
  • Encourage them to Register to Vote!

Don’t attempt to accomplish these all at once in a painful marathon of paperwork. Prioritize what needs to be done, pick snippets of time to talk to your child, and take her/him to the bank, to the attorney, etc. Encourage your child to ask questions in these meetings with bankers and lawyers. They need to develop their own voice with other adults in business.

This list might seem daunting, but with a little patience and an investment of time, you can help your child be more prepared to enter adult life. Isn’t that the goal of parenting? We all hope to raise smart, generous, responsible children who make a positive impact in the world. We can help them stand tall.

For more information on this topic, or to discuss your personal situation, contact Laurie Marshall, MBA, CFP® at (248) 641-7400 or lmarshall@sequoia-financial.com.

 

*Edit made on 6/28/19 to original post – The age of majority for custodial accounts varies by state and typically ranges from 18-25. We generally recommend avoiding joint titling on accounts due to a variety of complex estate planning and asset protection reasons. Granting the parent power of attorney may be most appropriate. If you have specific questions, please feel free to email us at info@sequoia-financial.com.