It may seem odd to be asked about doing estate planning for college students when they probably have few if any assets. When your children were still under your roof and they were legally your responsibility as minors, there was no additional effort or planning required to handle their affairs. But at 18, your child is an adult, and legally, he or she is the only one who can make certain decisions for themselves.
The pandemic has served to highlight the need for proper legal planning to be in place before an unforeseen event occurs with or to your adult child. The question is: what happens in a worst-case scenario, such as a situation where your adult child needs medical or financial help that they are unable to handle due to unforeseen circumstances? It’s important that your adult child has the proper legal documentation in place to allow someone to act on their behalf in the event an unanticipated circumstance occurs. If not, he or she could find themselves in a potentially dangerous limbo until they are able to handle their affairs.
What is Estate Planning
This is simply the process of arranging for an orderly transfer of your assets to the people you want to receive them, it involves identifying who you want to give your assets to and when, either in your life time or at death; but sometimes done after death).
Most often than not, we look at Updated beneficiary designation forms as one Estate planning we all need where it forms on life insurance policies, 401(k) accounts and other assets will generally override any conflicting provisions within a will or trust. It’s essential to make sure all forms are checked and updated regularly, ideally on an annual basis.
Two Estate Planning Documents Clients Need for College-Bound Kids
1. Health Care Directive
For health care decisions, state law applies and most states have default statutes for who can make medical decisions on your behalf. However, it is not always the order you want. This can be problematic when children are out of state at school because they might not be familiar with that state’s laws. A health care POA is most important, as it authorizes someone else to make medical decisions on behalf of the child, and gives access to medical records in the event that the child is incapacitated or temporarily unable to make decisions for their self. This document is state-specific to where it will be used.
2. Durable Power of Attorney
Another option people are selecting as well, is a durable POA to make financial decisions on their child’s behalf. This is also state-specific. The financial POA can authorize the designated agent to deal with student loans and sort out tuition bills. Both documents are relatively inexpensive and quick to put in place. It’s a good idea for parents with kids heading back to college to have them.
Importance of Estate Planning.
An Estate Plan Protects Young Children
Nobody thinks of dying young, but if you’re the parent of small children, you need to prepare for the unthinkable. This is where the will portion of an estate plan comes in; to ensure that your children are cared for in a manner of which you approve, you’ll want to name their guardians in the event that both parents die before the kids turn 18. Without a will that names these guardians, the courts will step in to decide who will raise your children.
An Estate Plan Eliminates Family Messes
We have all heard the horror stories; someone with money dies and the war between family members begins. One sibling may think they deserve more than another, or one sibling may think they should be in charge of the finances even though they’re notorious for racking up debt. Such squabbling can get ugly and end up in court, with family members pitted against one another.
An Estate Plan Spares Heirs a Big Tax Bite
Estate planning is all about protecting your loved ones, which means in part giving them protection from the Internal Revenue Service (IRS). Essential to estate planning is transferring assets to heirs with an eye toward creating the smallest possible tax burden for them. Even just a bit of estate planning can enable couples to reduce much or even all of their federal and state estate taxes and state inheritance taxes.
Updates beneficiary designation form
Beneficiary designation forms on life insurance policies, retirement accounts, and other assets will generally override any conflicting provisions within a will or trust. It is essential to make sure all forms are checked and updated regularly, ideally on an annual basis. An estate planning professional can help you create or update these basic items as well as provide suggestions for additional steps, if needed.
Letter of Intent
A letter of intent is simply a document left to your executor or a beneficiary. The purpose is to define what you want to be done with a particular asset after your death or incapacitation. Some letters of intent also provide funeral details or other special requests.
If you would like to learn more about the documents you need in estate planning, any one of our estate planning attorneys would be happy to assist you.