Advisers should address these legal issues before clients' kids head to college

Power of attorney is among the documents that can help reduce stress when a student is away

Aug 11, 2015 @ 12:56 pm

By Liz Skinner

Even before packing the laptop and the XL twin sheets, parents with kids heading off to college for the first time should make sure they have taken care of a few legal housekeeping issues.

Among the documents that families should consider securing are the student's power of attorney, a health care proxy and in some cases, a will.

"When kids turn 18 we don't just flip a switch and give up responsibility for our kids, but legally nearly everything changes when they are no longer a minor," said Henry Johnson, chief executive of Fiduciary Trust Company International, the wealth management division of Franklin Templeton Investments.

Mr. Johnson's own 18-year-old son starts at Dartmouth College this month.


A parent or guardian having the student's general power of attorney — being able to sign documents on their behalf and have access to their financial accounts — is a convenience for both the parent and the child, he said.

(More: Help clients kick kids out of the house without feeling guilty)

It's important to discuss with the adult child when and how parents will use it, but the signing authority can save time in certain situations, such as paying a bill, securing an apartment lease for the summer or straightening out a lost credit card.

"It puts parents in a place to stand in for the student who is away," Mr. Johnson said.


Also, once a child is 18, parents should talk with them about having a health care proxy, which allows someone else to make health care decisions when a person is incapable of doing it themselves.

Without this signed form, parents won't be able to make medical decisions if the child is unconscious, they won't be alerted if their adult child is admitted to the hospital and they won't even be able to discuss the care or condition of the adult child with their doctors, he said.

Along this vein, whoever is appointed the proxy also should be identified on a Health Insurance Portability and Accountability Act, or HIPAA, form to give medical professionals permission to share information about their patient.

"When I discussed this with my son, we talked a lot about where his privacy began and ended, and under what scenarios we would use this," Mr. Johnson said.

Financial adviser Wayne Zussman of Triton Wealth Management said parents also need to check in with their health insurance companies if the student is going to be living out of state.

"Some carriers have different coverage rules for instate and out of state; same with auto insurance," he said.

Medical directives also need to be specific to the state in which the child is going to school, Mr. Zussman said.


Although no one wants to think about anything tragic happening, college prep time is a good opportunity for young adults to create a living will. It states their wishes regarding the extent of life-extending medical treatment they want to receive in case they are incapacitated, as well as their interests in donating organs.

Some parents also should think about whether their adult child should have a will, spelling out what happens to their assets if they die.

A will is especially important for families that have invested in estate planning techniques aimed at passing wealth down through the generations, because the adult child's assets will go back up to parents if nothing is in writing to stipulate otherwise, Mr. Johnson said.

(More: Supersaving for college with Roth IRAs)

Parents may have been giving their child money up to the $13,000 gift tax exemption every year to keep it out of their own estate, and suddenly that total lands back among their own assets if something happens to the child. It's better in this case that the child have a will that distributes the assets to siblings or cousins, he said.

"My son was mostly concerned about his specific tangible assets, essentially leaving his fishing rods to his brothers," Mr. Johnson said.

Discussions around all these legal documents can be heady for parents and their 18-year-old children, but they may make certain stressful situations in the future much easier.


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