It’s hard to believe, but in a few short weeks, students will be graduating from high school or returning home from college to spend the summer with their families. In between summer jobs and vacations, the summer is a great opportunity to have important conversations with children about their own financial and estate planning.
The time between high school and college in particular is full of important milestones — not just personally, but also legally and financially. From a parent’s perspective, once a child becomes a legal adult, parents lose the automatic authority to make medical or financial decisions on their behalf.
Below is a list of financial and estate planning topics parents should discuss with their young adult children who are graduating high school or are in college:
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Essential Legal and Estate Planning Documents
Once a child turns 18, parents can no longer legally access their child’s medical records or make financial decisions for them without explicit permission.
- Healthcare Proxy: Appoints someone (usually a parent) to make medical decisions if the young adult becomes incapacitated.
- HIPAA Authorization: Allows healthcare providers to share a young adult’s medical information with their parents. Without this, doctors may legally refuse to give parents updates on their child’s health status.
- Durable Financial Power of Attorney: Allows a designated person to handle financial matters (paying rent, accessing bank accounts, managing student loans) if the young adult needs assistance.
- Basic Will: While most college students don’t have significant assets, a simple will is a good idea, especially if they have a car, savings, or digital assets they care about.
- If a young adult already has these estate planning documents in place, but is moving to a new state after graduation, it may be appropriate to update these documents in their new state of residence.
Financial Considerations
- UTMA Accounts: Is your child the beneficiary of a Uniform Transfers to Minors Act (UTMA) account? Depending on the state in which the account was established, these accounts typically expire when a young adult reaches age 18 or 21. At that time, the account’s assets must be transferred to the young adult. Many parents have concerns about this asset transfer, but receiving assets can also be a valuable learning experience for a young adult. It can also lead to more detailed estate planning conversations, which may include using the assets to fund a revocable trust.
- 529 Accounts: This is a good time to evaluate the balances of 529 accounts and determine whether additional funding is appropriate. For college graduates with excess funds in their 529 account, the account owner (usually a parent) will want to determine whether those funds can be used for other family members – other children, nieces, nephews, or the parent themselves. If no additional educational expenses are expected, the funds can be put to other uses for the beneficiary, including Roth IRA contributions and student loan debt repayment, subject to certain rules.
The transition from high school to college, and ultimately into adulthood, is an exciting time filled with new opportunities and responsibilities. By taking the time this summer to have open, proactive conversations about estate planning documents, financial accounts, and long-term money management, parents can help set their young adults up for a more secure and informed future.
