At 18, a young adult might own little more than the contents of their bedroom. So estate planning might be the last thing a recent high-school graduate is thinking about—after all, what’s the point when you don’t have any significant assets? What an 18-year-old might not realize is that estate planning is about much more than assets. It’s also about making sure that, if something terrible happens, their loved ones can be involved in their care instead of being left to wonder what’s happening. Before heading out into the big, uncertain world, an 18-year-old should create three key estate planning documents.
Health Care Proxy
After a lifetime of having their parents involved in their medical decisions, upon turning 18 a young adult gets legal autonomy over their health care. Generally, that’s a good thing. But in the event that an 18-year-old becomes injured or seriously ill and is unable to make their own medical decisions, the patient’s parent/s won’t be automatically allowed to make those decisions. Creating a health care proxy (also sometimes called a medical power of attorney) lets the young adult give advance permission for their loved ones to make any necessary decisions on their behalf.
Say an 18-year-old is injured in a car accident while at college, far from home. He’s unconscious for several days. The doctors need to decide whether to perform a potentially risky surgery. If he created a health care proxy that named his mother as his agent, his mother would get to make the decision that she thinks her son would want.
The Health Insurance Portability and Accountability Act (HIPAA) guarantees patients the right to privacy over their medical information. That protection means that medical workers can’t talk about a patient’s condition with anyone, unless the patient has authorized it.
In the example of the injured college student: When the teen’s parents contact the hospital for information on their child’s condition, HIPAA rules would prevent hospital staff from sharing anything about the patient’s status, even with the patient’s parents. The only way hospital staff could share that information is if the patient gave their permission in writing. Because this isn’t possible if the person is unconscious or otherwise incapacitated, it’s important to complete a HIPAA release as part of the estate planning process. It may be part of the health care proxy.
Durable Power of Attorney
The durable power of attorney functions a lot like the health care proxy. It’s a document that an individual (the principal) creates to appoint an agent or agents to make necessary financial decisions on the principal’s behalf. If the injured college student owed a rent payment while he was unconscious, the parent he had named as his agent would be allowed to access his account and make the payment on his behalf. Though an 18-year-old may not have many pressing financial commitments that would require an agent’s help while incapacitated, a durable power of attorney could prove very important once the principal owns a home or has other significant financial obligations that need to be met even if he’s injured.
Other Estate Planning Documents
It’s rare for a healthy 18-year-old to really need a will. For one thing, they’ll hopefully have decades of life ahead; for another, few young adults have substantial assets other than their personal belongings. When an adult dies intestate (without a will), their state’s intestate succession laws determine who inherits their assets. For an 18-year-old who isn’t married or a parent, generally their parents would be the ones to inherit their possessions. This gets complicated if the parents are divorced, or if other family members make claims on the deceased’s belongings. Creating a will may be a useful part of the estate planning process for a young adult who feels strongly about how they would want their estate settled.
Trusts and other estate planning tools may be beneficial for certain 18-year-olds, like those who have their own children or who have accumulated significant assets. The average new high school grad may not have any need to create a trust, but an estate planning attorney can review the options and make specific recommendations.
Generally, though, an 18-year-old’s estate planning process is complete with the creation of a health care proxy, HIPAA release and durable power of attorney. These documents are quick and painless to create. The 18-year-old will need to make some decisions about who to name as agent/s, then review and sign the completed documents. Hopefully, none of those estate planning documents will ever be necessary—but if the unexpected happens, it will be a tremendous relief to have them on hand.
Sachetta Callahan is here to help with life’s road ahead. Estate planning is an important part of your financial plan. We can introduce you to a law firm that can help guide your family in this risk management process. Contact Sachetta Callahan for assistance taking this step.