Estate Plan Review

This February marks a Leap Year, where we get one extra day in the month. This calendar oddity occurs once every four years and helps keep us in sync with the seasons. Leap day offers us an extra day this year to take the time to ensure that we have paid proper attention to our estate plan. It is important to check in every so often to confirm that your plan and documents continue to reflect your wishes. Laws and regulations change in small ways each year, and every once in a while there’s a significant change in estate law. We recommend that you use this extra day as an opportunity to review and evaluate your estate plan.

In addition to investing time to review your own plan, it is equally as important that your young adult family members have certain documents in place when they turn 18. As anyone who has experienced this knows, four years of high school may lead to four years of college, and your family member’s 18th birthday happens somewhere in this period. This important milestone has material consequences. On the one hand, when your family member turns 18, they are considered a legal adult: they can own property, vote, serve on a jury, get married, enter into binding contracts, and potentially be sued or serve jail time if they break the law. Meanwhile, a parent’s legal right to access their medical, financial, and academic records ceases, regardless of whether the child still qualifies as a dependent for tax purposes, is in high school, covered by a parent’s insurance, or a parent is paying their tuition. However, turning 18 does not always mean immediate autonomy, and there could come a time when your family member needs assistance and a parent may have to intervene on their behalf. Without putting certain documents in place, parents will have no access to their medical, financial, or academic records.

We recommend having these five legal documents when your young adult family member turns 18:

  • HIPPA Waiver: After your family member turns 18, the privacy of their personal health information is protected under the Health Insurance Portability and Accountability Act (HIPPA). Consequently, health care providers are not legally permitted to disclose a patient’s medical record or even discuss their health status or treatment recommendations with anyone. This includes the parent of a young adult who is still on their parent’s health insurance plan. The Privacy Rule exists to create a trusting environment between patients and their doctors, so that patients will feel comfortable seeking care and openly communicating with their doctors. You will need a HIPPA authorization form if you want to maintain access to that information. Please note that the child can limit the breadth of access to their sensitive information based on their comfort level.
    Many colleges will offer their own HIPPA form that would provide access to the child’s medical records from the college health center. This may be especially important when dealing with mental health issues.

  • Medical Power of Attorney:  Also known as a health care proxy, this document gives parents the authority to make health care decisions on behalf of their child. The health care proxy does not become effective until an individual is incapable of making his or her own health care decisions, and may be revoked at any time while the individual is living and competent. This is one of those documents that you hope you will never need, but will be thankful to have in place should circumstances necessitate. Please note that each state has its own rules governing medical power of attorney documents, and many have their own legal forms. If the child is going to college out of state, or simply moving away, it is important to research the documents you need in both your home state and the state where they will be living. Without a health care proxy in place, an individual’s family may argue about medical treatment in emergency situations or otherwise not have authority to make important medical decisions. Now is also a good time to make sure your young adult knows his or her medical history and insurance information. Most healthcare providers have online or phone apps that they can use to access this information and help them schedule their own medical appointments.

  • Durable Power of Attorney:  Most young adults still need financial support well past the age of 18 and may be covered under their parent’s health and car insurance, as well as family phone plan. Even though they may pay the bills, parents have no legal authority to act on behalf of their children who have turned 18. Similar to the health care proxy, the durable power of attorney grants the individual with the authority to make financial decisions, take certain legal actions, file tax returns, etc., if the child were to become incapacitated, or even if they simply choose to study abroad during college. Parents can manage financial obligations so that student loan bills, car and tax payments do not get overlooked. If parents are separated or divorced, it is even more important to determine which parent should handle financial matters on the child’s behalf.

  • Living Will:  A living will specifies personal choices about life-extending medical treatment in the event that your young adult family member cannot communicate their wishes themselves. This gives guidance to the agent appointed under the health proxy. It is also a good place to document religious or other personal wishes. Be sure whatever you sign is consistent with your beliefs and wishes.

  • FERPA Waiver (Optional):  The Family Educational Rights and Privacy Act (FERPA) is designed to protect the privacy of educational records, including report cards, disciplinary actions, and test results, and in some cases may include records maintained by a college campus’s health clinic. When your family member turns 18 or enters college at any age, their academic record becomes solely their own, regardless of who pays the tuition. FERPA applies to all schools that receive funding under any program administered by the U.S. Department of Education. Students over age 18 are required to give written consent before any educational records can be released to another person.

For most people, a few basic documents can provide tremendous peace of mind. No matter how self-sufficient, financially and emotionally independent your young adult family member, it is prudent to prepare for the unknown. These documents aren’t just used for estate planning. Together they serve as a vital safety net now that your family member is legally an adult.

It is just as important for clients to revisit their own documents to be certain that they fulfill their wishes and address new realities. A HIPPA waiver, health care proxy, durable power of attorney and living will (outlined above) are just some of the documents essential to an estate plan. While you are helping your young adult family members put in place important legal documents, make sure you have also done the same. Some other fundamental documents include:

  • Last Will and Testament:  A will clarifies how you want your property and assets distributed after you pass away and under what conditions. These could include certain age considerations, milestones, and specific purposes, to name a few. A will may indicate who should be in charge of administering your estate (the “executor,” “personal representative,“ etc.). Importantly, if you have minor children, your will is the only document in which you can name guardians for them in case anything were to happen to you and your spouse. If you die intestate (without a will), your estate will be subject to the probate laws of your state of domicile, which may not reflect your wishes.

  • Revocable Trust: Also known as a living trust, this is a fiduciary arrangement where the grantor (the person who creates the trust) transfers all or part of their assets during life. A revocable trust can be revoked, amended, or terminated and the property recovered by the grantor.  Many revocable trusts are created to avoid probate, since assets in such trusts should not be subject to court supervision like assets that pass under the individual’s estate and which are governed by their will. But that is only one of many benefits that this planning tool can provide.  A trust can take effect automatically during your lifetime allowing a named trustee to assume responsibility for your investments and financial affairs should you become incapacitated. Upon your death, trusts can provide financial security for your spouse, pass assets to your children, future generations and charities in the manner you specify, and help minimize estate taxes.  Trusts are exceptionally valuable planning tools.

  • Beneficiary Designations:  These indicate where retirement, insurance, annuities and other assets will pass on death. Review the designations you have in place to make sure your preferred beneficiaries are listed for each asset. Consider choosing a successor in case your designated beneficiary does not survive you. Beneficiary designations may need to be updated if you have had major life changes (marriage, divorce, birth of a child, etc.).

  • Deeds and Other Title Documents:  A deed is a formal legal document confirming ownership of real estate. If you own your house with another person as joint tenants, that means you each own an interest in the property and on death it passes to the survivor. Bank accounts and other assets can be listed as “Pay on Death to” or “Transfer on Death to” to direct who can access the assets and who inherits at your death, thereby avoiding probate. Your assets should align with your estate planning strategy, so it is important to check all of your beneficiary designations, titling, and other legal documents for any needed changes.

Thus, what begins at 18 evolves into a more comprehensive estate plan as assets grow, life happens, and circumstances change. Estate planning is not just for the elderly, dying or super wealthy - there are some estate planning documents that every individual should have. We advise clients to do a regular inventory of all their documents and review them to ensure they are current and reflective of your wishes. Consider regularly discussing your plans with your tax and legal advisors and your wealth planning specialists. Getting the process underway now can help you make arrangements for your wishes to be fulfilled while avoiding any unwelcome surprises for your heirs. Please reach out to your Relationship Manager to discuss these documents or review your estate plan.