Planning With Adult Children

Legal documents that may seem mostly for the elderly can mean just as much for parents and their adult children looking to control risk.

I recently celebrated my eldest son’s 18th birthday even as I nursed a twinge of regret – okay more than a twinge – over the end of his childhood. While our children may remain financially dependent well beyond their teens, they become legally independent at the age of majority. As your adult children enter the world of college and career, you can protect them and yourself with properly prepared estate-planning documents.

Mercifully, tragedies rarely occur when our children leave home for college or career. But they do happen. My son loves rugby, which sends us on a few unplanned trips to the hospital; he plans to play in college. We hope we’ll never need his health-care power of attorney, giving us the authority to make his medical decisions if he’s unable, but we’re scheduled to sign those documents tomorrow with our lawyer.

Have your proper documents in place before you need medical records or to make decisions in emergencies – especially in light of today’s stringent health-care privacy regulations and the likely confusion during a crisis. Discuss documentation with your adult child and explain the benefits of legally empowering you to make financial and medical decisions if they can’t. Make clear that when your adult children do their own planning in the future, they’ll designate their own decision-makers. This talk also prepares them for when they may make decisions for you.

Start this process by evaluating your estate planning. Do your plans need updating or revision? If so, contact an estate-planning attorney to discuss your own and your child’s planning needs together. Stand-alone document preparation for a child typically cost about a few hundred dollars. You can purchase estate-planning software to do it yourself, but an estate-planning attorney ensures that the plan fits your needs and conforms to your state’s laws.

The important documents for your adult child:

Advance medical directive. Many states now combine the health-care power of attorney and living wills into the advance medical directive. These directives appoint a health-care proxy, an individual to make decisions about your health care if you can’t. The document also contains instructions on your wishes should you need artificial life support.

Durable power of attorney. This names the person who can make decisions about your money and property if you can’t. In many states, a power of attorney becomes invalid if you become incompetent or incapacitated – exactly when you need someone to make decisions for you. A durable power of attorney remains valid regardless. You can write this document without a lawyer, but mistakes in such minutiae as the recording and notarizing might invalidate this document. Again, I recommend working with an estate-planning attorney.

Regarding stock markets, Santa Clara University Professor of Finance Meir Statman once said, “The real risks in life are not the stock market. If you want risk, get married. And if you want more risk, have children.”

True words. To manage the risks that matter most, start with solid estate planning for you and your family and keep it current as your children mature into adulthood.

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Sheri Iannetta Cupo, CFP, is founding principal of SAGE Advisory Group in Morristown, N.J. SAGE is an independent, Fee-Only firm specializing in providing busy professionals and their families with holistic financial planning and investment management services. Our firm philosophy: LEARNING and EDUCATING, with an emphasis on applying academic evidence to sensible, real-life investing; CARING for our clients in a fiduciary relationship; and SIMPLIFYING busy professionals’ financial affairs. Check out Sheri’s popular blog covering a range of financial-planning and life topics.  For even more SAGE Advice in your life, connect with Sheri on Twitter, Google+ and LinkedIn.

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