Personal legacy planningWhat to do when your child reaches the age of majority

What age is considered adulthood? Most states¹ consider 18 to be the “age of majority,” in which a person is legally considered an adult. That means an eighteenth birthday is special – and not just in the celebratory sense.

One ramification of this status is that newly minted 18-year-olds are suddenly put in charge of their healthcare decisions and finances. It’s a change of events that can be disorienting, and not just for those blowing out the candles.

“I think it catches parents off guard, because as you're raising your kids, you're used to being able to make these decisions for your children,” says Justin Flach, managing director of wealth strategy for Ascent Private Capital Management of U.S. Bank. “And these days, it doesn't feel like 18 is full adulthood.”

Parents and guardians can help their children navigate their new responsibilities through thoughtful conversations. They can also encourage their kids to formally document their intentions relating to their financial, medical and additional matters.

“I think it catches parents off guard, because as you're raising your kids, you're used to being able to make these decisions for your children.”

- Justin Flach, managing director of wealth strategy, Ascent Private Capital Management

Here’s a roundup of paperwork and other issues for families to consider as they approach this inflection point:

Age of majority checklist

Powers of attorney

These documents can help young adults ensure that parents – or other trusted adults – are able to stay legally involved in their finances and medical care if needed.

• Durable financial power of attorney
  Your child can name an agent or co-agents who can handle their financial affairs if they aren’t able to themselves. This is helpful in worst-case scenarios, such as if they become incapacitated. It also comes in handy in less dire circumstances. For example, they may be studying abroad and need someone to rent an apartment and set up utilities for when they return.
• Healthcare power of attorney
  Similarly, your child can name an agent or co-agents to act on their behalf when they can’t make their own medical decisions. “We have a client who put their parents in charge of their financial power of attorney but their older sister, who's a nurse, in charge of their health,” says Nate Rothbauer, managing director of wealth strategy for Ascent. This example shows how important it is for young adults to choose agents who are best suited to carrying out their wishes – and this might not be their parents.

Living will

A living will communicates the kind of medical treatment someone wants when they can no longer make decisions for themselves. These are sometimes woven into healthcare powers of attorney.

Final instructions

Youth should be a time of vibrancy, but sometimes the unthinkable happens. Your child can gain a sense of control and reduce potential family conflicts by documenting their wishes about their end-of-life care.

A will and revocable trust

Many 18-year-olds already own assets. They can use a will to direct where they want them to go upon their passing and who they want to handle their estate.

A revocable trust, which is also called a living trust, serves the same purpose as a will but has an added benefit. It creates a structure for assets to pass to others without first having to go through the very public probate process. Many high-net-worth individuals create both a revocable trust and a will that “catches” any assets that aren’t in the trust.

Digital asset authorizations

Young adults can use these forms to indicate who can take over or shut down their digital assets if they become incapacitated or pass away. These assets may include social media accounts, email accounts, blogs, smartphone data and photo storage accounts.

“There's a lot of communications there but also a lot of intellectual property and creativity going on in those spaces that you may need to capture for that young adult if something were to happen to them,” Flach says.

An estate planning attorney can help families draft digital asset authorizations, as well as powers of attorney, wills and trusts. Working with a professional can help ensure these important documents are both up-to-date and tailored to individual situations.

Permissions to discuss

Once your child turns 18, the privacy of their health information and their education records becomes protected under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and Family Educational Rights and Privacy Act (FERPA), respectively.

• HIPAA
  Young adults can indicate on HIPAA medical information release forms that they want their parents or others to have access to their health records. While there are standard HIPAA waivers, many providers like to use their own versions.
• FERPA
  Students 18 or older can designate on a college’s FERPA waiver which individuals can access their education records. Notably, schools may choose to release records to parents without a student’s consent if either parent claims them as a dependent for federal tax purposes.

Other considerations for the age of majority

To be sure, legal documents don’t make the best birthday gifts, but turning 18 does come with some exciting financial perks. Your child can open their own investment account, checking account, and potentially a credit card account as well. They may also be able to participate in retirement savings accounts if they’re employed.

In addition, some 18-year-olds can gain direct access to funds in custodial accounts and trusts. Parents can help their children make a plan for this money that is consistent with the values of the family, Rothbauer says, and they can discuss the importance of financial security.

Ideally, this won’t mark the first time that discussions about handling money come up in the family. If so, Flach says a young family member could feel overwhelmed about abruptly managing a large amount of money or fail to understand the risks of certain financial choices.

“If you wait until the young adult has access to funds to start the financial education for them,” he says, “it's going to be too late.”

Instead, discussions from a young age about financial literacy, new wealth and financial responsibility will set your children up well as they hit the age of majority and beyond.

Learn how Ascent works with and supports families with significant wealth.