Estate Planning for Young Adults Can Save Time, Money, Heartache
Written by Dane J. Dehler
When we think about executing estate planning documents, what doesn’t typically come to mind is a 17- or 18-year-old son or daughter who is about to graduate from high school and is on the verge of beginning the journey that is college or a career. In today’s world, 18-year-olds are still young, figuring out what to do with their lives, and often still rely heavily on parental guidance. But legally, things change dramatically when a child reaches age 18.
In Arizona, while your child is under age 18, you have the right to access medical records, and make medical and financial decisions on the child’s behalf. Once your child turns 18, the child is legally an adult, and you no longer have decision-making authority over him or her. Instead, because your child has turned 18, he or she now may make his or her own decisions and also has extensive privacy rights.
If the child is involved in an accident or otherwise ends up in the hospital, you may no longer have immediate access to medical records, and decision-making authority is not automatic. If the child needs help with banking or finances, you can no longer call the bank and expect a response. Things can become even more complicated if parents are divorced or otherwise unable to agree on key issues, or both. As a result, if your child is about to turn 18, it is important to consider planning. To avoid future headaches, consider speaking with the child about executing the following estate planning documents:
Durable General Power of Attorney
With a durable general power of attorney, a/k/a financial power of attorney (FPOA), a child can name one or both parents (or another trusted individual) to handle his or her financial affairs. The person named is referred to as his or her “attorney-in-fact” or “agent.” The documents are designed to be used in the event someone becomes incapacitated, but they can be drafted more broadly so a parent can continue to help out regardless of a child’s mental or physical condition.
Financial information is considered private when a person turns age 18, so no one else can legally pay an adult’s bills, make deposits, select investments, etc., without having some legal authority. If the young adult becomes unable to handle his financial affairs and no FPOA is in place, a parent will not have access to credit cards, bank accounts, cell phone records, and so on, to ensure bills are up-to-date and paid. Parents may be forced to file for an expensive, intrusive court proceeding to obtain a conservatorship in order to access records and accounts. Once a conservatorship is in place, the conservator must continue to account to the court on an annual basis. Having an FPOA in place is far easier and less expensive.
A new adult, however, may want assistance even in the absence of a crisis. A child may take a summer internship in another city, study abroad, travel, or simply be immersed in coursework, and need financial help. With an FPOA that is effective upon signing, the person named as the agent can resolve the issue without having to demonstrate that the child needs help. This type of power of attorney is called “presently effective”; the other option is called “springing” and typically requires documentation from a doctor or other medical professional attesting to the fact that the child is unable to handle his or her affairs.
Health Care Power of Attorney and Advance Directive
As parents, we find it hard to imagine we might not have a say in our children’s health care. But at 18, they become their own deciders for medical issues, too. A health care power of attorney (HCPOA) is similar to a financial power of attorney, but it’s for health care decisions. The document names one or more people to make medical decisions in the event the person signing (the “principal”) can’t.
These documents typically include what’s called a “HIPAA release.” HIPAA is the federal law that strictly protects a person’s medical privacy, and the release allows the person named under the document to access medical records and information. If your adult child remains on your medical insurance plan, you may be able to obtain some information from the insurer, but there are no guarantees.
The worst case, of course, is if the child ends up hospitalized and unconscious or otherwise unable to communicate. Under A.R.S. § 36-3231, medical providers are to seek out “surrogate decision makers”; those named under a HCPOA come first. Family members are consulted only if there’s no HCPOA, and in a specific order. (Parents are third after spouse and adult children.) Relying on the statute can be precarious, particularly if parents might not agree about treatment. If disagreements arise, a petition may be filed in court to have someone appointed as legal guardian in order to make the decisions. If parents can’t agree, that person could end up being another family member or even a neutral party. When a child is injured or ill, the last thing any parent wants is to be forced to undertake a legal proceeding. We’ve seen high-profile cases play out in the media, and those have usually involved younger people. A simple health-care power of attorney document helps prevent that.
A HCPOA clearly designates whom the child wants to make decisions. This is where the Advance Directive, or “Living Will,” comes in. In any situation where the child cannot communicate his or her wishes, the Advance Directive provides some guidance regarding desired treatment or desire not to undergo treatment
Of special note: In Arizona, mental health is a separate matter. If a child suffers from a serious mental health issue, an ordinary HCPOA will not allow a health-care agent to have him or her admitted to an inpatient psychiatric facility without his or her consent. The agent must have specific “mental health” powers. Without those specific powers, a special court proceeding may be required to obtain or continue treatment, which can be both traumatic and expensive. To be safe, ensure that your child has also signed mental health powers, either included in the HCPOA or in a separate form.
While in high school, teenagers can accumulate money and property from part time jobs, holiday and birthday gifts from relatives, and of course, highly anticipated high school graduation gifts. These assets are typically titled directly in the child’s name. If the child were to die, these assets would pass to the beneficiary named on the account, though it’s rare for a teenager to name anyone. If none is named and there’s no Will, the child’s assets would pass to the child’s parents if the child has no spouse or children. However, this may not comply with the child’s — or the parents’ — wishes. For example, the child may want to provide for siblings, relatives, friends, or even charities. A Will would allow the child to specify what he or she wishes, including gifts of personal property that might not be worth much, but might be priceless to a friend or sibling.
The execution of a Will also allows the child to name a Personal Representative (aka “executor”) to administer the probate estate, if that becomes necessary. (A probate is needed if assets exceed $75,000, or $100,000 of real estate.) Regardless of whether a court proceeding is required, a Will can ensure that wishes are expressed in a way that makes them legally binding.
Execution of these three documents ahead of time can prevent additional, needless trauma in the event of a catastrophe or can be beneficial if the new adult simply needs some help. The bottom line is, if you have a child approaching age 18, consider meeting with an estate planning attorney to discuss the importance of executing powers of attorney, and if they have assets, a Will.