My Child is 18, Now What?

My Child is 18, Now What? – Needless to say many important changes often occur when a child turns 18.   They may leave home, go to school, enlist in the armed forces, or get a job, to name some possibilities.  Once a child turns age 18 all the parental legal controls that previously applied when their child was a minor no longer apply.  That said, let us discuss some important estate planning issues for parent to consider regarding a child who turns 18.

Once a child is eighteen it is very important that the child have a health care directive nominating an Agent for health care, and also have a separate HIPAA release, to protect the child.  Otherwise an expensive and avoidable conservatorship proceeding may be necessary should a serious illness or injury make the child incapacitated.  For children who reside partly outside California (e.g., perhaps they attend school elsewhere) then it is often advisable that they have health care directives in each state, as state’s laws and forms vary.

In addition, young adults also need to have a durable power of attorney in case they are ever no longer able to control their own financial, property and legal affairs.  Who will use their bank accounts to pay their bills if they are temporarily incapacitated while studying away from home (including tuition, room and board, etc.)?  Who is going to manage their schools loans and other types of financial assistance?  Who will apply for government benefits?  One approach might be to include a parent on the child’s bank account with check signing authority.

Often small inheritances received while the child was a minor (such as $5,000 gift from a deceased aunt) are often held in custodial accounts in the parent’s name for the minor’s benefit.  At 18, however, any child custodial accounts held for their benefit become immediately payable, unless age 25 is specified.  Such custodial funds must be released regardless of whether it is in the child’s best interest.  Only a conservatorship of the person’s estate could intervene to control such custodial funds.

If a child who is unable to function as a self-sufficient adult, it may be advisable to commence a conservatorship in order to protect the child, especially in the future after the parents are deceased.  There are two types of conservatorships:  a conservatorship of the person and a conservatorship of the estate.  The conservatorship of the person allows the conservator to fix the residence of the conservatee and to make medical decisions.   The conservatorship of the estate allows the conservator to control the conservatee’s assets, finances, and takes away the conservatee’s ability to make contracts.

At age 18 many persons are not yet capable of properly managing their own financial and property affairs.  Accordingly, parents may choose to hold their children’s inheritance in further trust until the child reach 25 year of age.  Such trusts can benefit the child, in the interim (prior to complete distribution), in various ways, including payments for education, health insurance, transportation, etc.

Moreover, if there are other minor/dependent children in the same family home, then middle-class parents may wish to hold the family home and major financial assets in trust for the primary benefit of the minor children and secondary benefit of adult children (who can support themselves).  The family trust is then not divided amongst the children until all the children are adults.

In sum, that a child becomes an adult at age 18 means that the child assumes a host of responsibilities and risks.  Parents can protect their adult children against some risks by seeing that the child has a health care directives, a HIPAA release, and a power of attorney.  Such investments can be very valuable down the road.