Which of these three sentences is true? My pet octopus likes to be walked three times a day. An 18-year-old is an adult. Hudson Valley drivers never tailgate and always follow traffic rules.
The smart money is probably on the octopus story, but lo and behold, an 18-year-old is actually an adult… legally. Why this matters will be clear to every parent who has called a college health center to get an update on their child’s status.
Adulthood confers a right to privacy. Specific authorizations must be prepared to allow a parent of a college-age child to receive important health information or handle finances. Once a son or daughter crosses the age of majority threshold, the free and easy parental access and control over their child goes away.
Many colleges believe it is their obligation to protect their students’ privacy at the expense of a parent’s natural interest in safeguarding their child. Legally, colleges are technically correct, even if the methodology is heavy handed. It is then up to the child to re-establish those links through legal documents and think constructively about personal finance.
Every young adult needs basic estate planning to ensure that the people who care about them most have the ability to help.
An estate plan for college students looks something like this: Before college begins, your 18-year-old should complete a Health Care Proxy and Power of Attorney, naming parents as decisionmakers. With those documents in place and filed with the college, parents can more easily communicate with college officials, should something happen.
Set up a basic student checking and savings account with one or both parents as joint owner. The account should have a debit/credit card that can be augmented by a parent if funds get low. While establishing credit with a non-bank-account-linked credit card is important, the danger of overspending with punitive interest rates is something that should be discussed.
A low-fee brokerage or mutual fund account makes sense as your child accumulates income from working part-time and looks for some growth with limited risk. Naming parents as beneficiaries on these accounts is a good idea. If parents have a trusted financial advisor, then seek out advice to fine tune their child’s money education.
The key is the word “education.”
This is the time to learn how important saving is and how the routine of having a set amount of earnings automatically sent to an interest-bearing savings or growth investment account must be maintained. For the really motivated, establishing a Roth IRA to begin their retirement planning journey may be useful.
While nudging 18-year-olds to prepare a Will feels a little off, thinking about preserving their digital lives is logical. The vast amount of time and attention an 18 -year-old has spent online means there is a tremendous amount of content that needs protecting and cataloguing. Except for older sites like Facebook, not enough social media sites include memorialization options, but that could change as this generation ages.
Eighteen is where estate planning and financial literacy cross paths. Form good habits early and try not to deviate from those habits as expenses and work begin to pile up.
Alan D. Feller, Esq., is managing partner of The Feller Group, located at 625 Route 6, Mahopac. He can be reached at alandfeller@thefellergroup.com.