Congratulations to the class of 2024! If you’re the parent of a graduating high school senior, congratulations to you, too! This spring will be a whirlwind of special assemblies, final concerts, awards ceremonies, prom—and presents! You may have bought that showy car for graduation—or a new computer for college.
You’re probably realizing that graduation also brings a role change for you. Your new graduate is legally an adult for many purposes. 18-year-olds can marry and vote, and (males only) must register for the draft at 18. They can purchase a gun (subject to individual state laws). If your graduate is college bound, you may have learned that colleges are required to meet privacy rules under the Family Educational Rights and Privacy Act (FERPA). That means that in any college or university that receives federal funding, access to the student’s records is tightly restricted.
Maybe more surprisingly, when a teenager turns 18, according to the U.S. Department of Health & Human Services (HHS), insurance and health concerns become privacy issues, subject to the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Parents are no longer automatically consulted about health choices for their young adults. Questions of legality become murky, and healthcare providers may limit access to, subject to their interpretation of HIPAA. More information can be found at HHS’s advice page.
With all that heady independence, your child may be tempted to relegate you to the status of emergency advisor and piggy bank. I’m here to help you not only to give the best graduation gift ever, but to write the script for a starring role in your new young adult’s life.
Of course, you hope to remain a valued resource for your children—teaching them how to navigate the job market or college, complete tax forms, buy a vehicle, evaluate insurance policies—all the little pieces of knowledge we have accumulated. There are so many details to teach—wouldn’t the “Vulcan Mind Meld” come in handy?
But you can do more. Because you are the thoughtful parent that I know you are, take time to help your student to assemble their essential life documents. This may sound morbid and premature, but the COVID pandemic has reminded us that any day could bring a medical emergency. Car accidents, riots in urban areas, gun violence, slip-and-falls—it’s a dangerous world. Having essential life documents in place before your student leaves home gives them the underpinnings of security for the future.
The Three Essential Life Documents
It doesn’t take millions in assets or indeed any assets at all, to need these basic legal documents. They are:
- A Durable Health Care Power of Attorney (POA): authorizes someone to make healthcare decisions for your graduate if they are unable to make decisions for themselves.
- A Living Will or Healthcare Directive: gives specific direction about a person’s desires for medical treatment in the event they are unable to give informed consent. Sometimes, this is also referred to as a living will.
- A HIPAA Privacy Authorization: concerns information protected under HIPAA. Here you specify the persons (including you!) or organizations with whom records may be shared and who can have discussions with providers about the patient. With this permission, your young adult’s healthcare providers can legally share information with their parents.
These three essential documents, at least in their basic forms, can be completed without cost, although parents may want an attorney to review or assist in executing them. Each state has different requirements, and you should be able to find your state’s form online or obtain one at a major medical center.
And this month is well timed for a conversation with your graduate. National Healthcare Decisions Day is April 16. Organized by The Conversation Project, this day is a reminder to everyone to make these decisions formal, and the organization provides links to state-by-state resources that are available for free.
The documents above relate to decisions about health, but finances also have their own category of essentials. These generally require assistance from an attorney to create documents that are accepted by financial institutions as well as the legal system:
- A Durable Financial Power of Attorney (DFPOA). This grants someone the legal authority to handle financial issues if you are incapacitated.
- A Will. Why does an 18-year-old need a will? Because even if they don’t have assets now, they will in the future. And in the world of #adulting101, even young adults should control their own financial future.
- Simple wills are inexpensive and can save time and money if the unthinkable happens and the individual’s assets are in limbo.
Both of these documents should be drafted by an attorney who will make sure the documents are properly executed.
If they’re not ready for a will, your graduate at least can learn about beneficiary designations. Bank accounts and assets like vehicles should have one or more beneficiaries. TOD (“transfer on death) is yet another way to handle this. If you are unfamiliar with designating beneficiaries, consult your financial or bank advisor, or an attorney.
As a daily money manager, I often work with people in times of crisis or transition. For those who have prepared for these times—and who have their essential life documents in good order—the answers to many difficult questions about health and finances are already made. Without them, families can be at odds about important decisions, and obtaining legal determinations may require precious time and money.
Don’t Forget
Your homework: Help your graduate to have essential life documents in place at graduation, along with a reminder that this is not a “once and done” proposition. As life changes, these vital documents will be reviewed and updated.
Your deadline: Before they leave home, wherever they are going, whether college, trade school, or work.
Cynthia Hoffman, MBA, is founder and principal of Best Life Advisors, LLC, a Certified Senior Advisor®, and a member of the American Association of Daily Money Managers (AADMM). Best Life Advisors is a daily money management practice located in the St. Louis, Missouri, metropolitan area.
This blog’s content is for educational purposes only and should not be taken as investment or legal advice. We recommend you seek advice about legal matters from a qualified attorney. Opinions are the author’s own, and no guarantee is made about the information’s accuracy or completeness. The author assumes no liability for any losses or damages.
