Planning for College Kids and Young Adults

As young family members head off to school or leave home for a job, parents and other relatives may wonder how they can continue to support a child or assist with health care or other decisions. Many parents are surprised when they are unable to obtain information about their college-age or young adult children. HIPAA and other privacy laws prevent parents from easily obtaining information about an adult child in the hospital, for example. For that reason, we recommend that children going off to college, or other young adults who may rely on their family in case of emergency, sign health care directives and financial powers of attorney. It is also important to communicate with young adults about financial matters and health care decisions, even if these conversations can be difficult.

Gifts. Every year, each person is allowed to make a gift to another person up to a certain amount without incurring any gift tax liability. This is known as the “annual exclusion,” and the amount is now $16,000. The person making the gift can transfer up to $16,000 per recipient without using any estate and gift exemption amount and without needing to file a gift tax return. For example, married couples can give each child and grandchild up to $32,000 in 2022 without incurring any gift tax liability and without using any estate or gift tax exemption.

In addition to the annual exclusion, individuals can give unlimited amounts for health care expenses paid directly to medical providers and unlimited amounts for educational expenses paid directly to educational institutions. Thus, a grandparent who pays tuition directly to a grandchild’s college, and pays a hospital bill directly on behalf of another grandchild, can still make $16,000 in annual gifts to each of those same grandchildren.

Health Care Documents. A variety of federal and state laws prohibit a person’s doctor from disclosing “individually identifiable health information and medical records.” That means that an adult child could be having serious physical or emotional medical issues, and neither the college nor the healthcare provider will be able to discuss them with the parent or guardian. If a child is willing, they can sign an Advance Directive or Power of Attorney for Health Care (the name varies by state, but the concept is the same). This document authorizes a named agent to make medical decisions if the signer is unable to do so. It typically authorizes the release of confidential medical information to the named agent. Completing the form provides an opportunity to discuss the child’s wishes regarding a variety of medical matters. If a child is studying in or moving to another state, it is good practice to have them sign a health care directive for that state as well as their home state. It can also be beneficial to have the child sign a simple authorization to disclose protected health information to simplify disclosures where decisions need not be made by the parent or authorized family member.

Financial Accounts. If a child has assets in their own name (such as a bank or brokerage account), it may be helpful for a parent or guardian to be able to sign on that account, particularly if the child is far away or abroad. Having the child sign a financial or durable power of attorney can facilitate management of their finances if needed, whether due to incapacity, travel, or simple convenience. Most young adults conduct their lives online. If a child becomes unable to handle financial matters due to temporary incapacity it may be easiest to manage accounts through shared passwords.

Beneficiary designations. A child could also add a parent or trusted sibling as a joint tenant with right of survivorship or as beneficiary under a transfer on death designation to facilitate disposition at death. This may allow for the transfer of financial assets without the need for a will. It is important to discuss this step with an advisor as estate tax and other considerations may affect who is named as beneficiary and whether a will or trust is needed.

College or University Permission Forms. Many colleges and universities have institution specific forms that a student can sign to give access to records. Without authorization to disclose information, federal law prevents disclosures of certain nonmedical records.

For the Enlisted. Helping a young adult who is about to enlist can be complicated. Some may have chosen this path to seek independence at the earliest possible age, making it harder to help or influence them. Enlisting in the military comes with benefits that a newly minted graduate might ignore. The Army, Navy, Air Force, Marines and Coast Guard all have their own websites that outline salary and benefits. Members of the military have access to the government’s Thrift Savings Plan to start saving for retirement. The Consumer Federation of America coordinates a campaign called Military Saves that can help both with establishing financial goals and making a plan to meet those goals. Finally, there are the education benefits that come with military service. It’s not too soon to start thinking about how the G.I. Bill could help pay for higher education, including vocational training.

All of these discussions require a level of trust, and not every young adult will provide access to medical information, financial information and online accounts. But as you will hear from any parent whose child is in the emergency room, it’s worth asking.

Please let us know if you would like to discuss these options in more detail.