Legal documents such as durable power of attorney, a healthcare proxy and a HIPAA release can give parents the legal right to make decisions if their child needs help.
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The moment a person turns the age of 18, they are suddenly considered (in most states) an adult in the eyes of the law. Many parents don’t realize this, and many teenagers don’t fully understand the responsibility. For the first 18 years of your child’s life, you, as their parent, had full legal rights to make decisions on their behalf. That all changes the day your child turns 18. They can now legally rent an apartment, take charge of their finances and buy a car — all without a parent’s consent or assistance.
While some 18-year-olds are ready for this responsibility, others will still need guidance and support from their parents. In order to provide that support, the following are three basic legal documents your child should sign when they turn 18 to ensure you have the legal right to help your child.
A power of attorney is a document that authorizes someone to make financial decisions on behalf of someone else. It can be used for everyday financial tasks, or in the event the child is incapacitated, it gives the parent the authorization to pay bills, file taxes, apply for government/state services and perform banking tasks. It also often enables a parent to access their child’s college records, grades and billing records.
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Things to consider when choosing an agent
Younger adults oftentimes choose their parents to serve as their agent, but an agent can be any competent adult over the age of 18. One may also choose to have two agents. If there are two agents, they may serve jointly, meaning they both have to agree and be present to execute every decision, or they may serve jointly and severally, meaning that each agent named may act independently. For administrative ease, appointing agents jointly and severally is recommended, and agents are advised to confer about all decision-making.
What if you don’t have a power of attorney?
If there is no power of attorney in place, no one is authorized to act on your child’s behalf. If your child were to become incapacitated, you have the option to go to court and go through a lengthy process called conservatorship, where a conservator would be appointed to make financial decisions on behalf of the child. Conservatorships are only an option if a person is deemed incompetent. A power of attorney gives the parent more flexibility and enables them to help with any financial and other tasks for convenience purposes, even when the child is not incompetent.
Does your power of attorney grant your agent comprehensive power? Or can you select specific powers you want your agent to have?
While it is possible to eliminate certain powers from your agent(s), it is not advised. It is most often recommended that a client sign a general durable power of attorney, which gives broad and comprehensive power to the people named in the document because it is important that agent(s) have the power to do whatever is needed on behalf of the child. When your child turns 18, it is hard to imagine the details of their future, but at some point, they may own assets, need to apply for government benefits, have a pet in need of care, etc., and the more powers that exist in the power of attorney, the more help you can provide as a parent.
How to create a power of attorney
Many states have a statutory power of attorney. This is a standard state-approved form that can be downloaded and executed to become effective. In some states with no state-approved form, it is recommended that you enlist an attorney to establish a power of attorney. Your attorney will prepare the document, and they have the expertise to explain the powers outlined in the document.
Does a power of attorney need to be notarized?
Several states require a power of attorney be notarized to be valid. In other states, like Massachusetts for instance, a notary signature is not required, but it’s highly recommended. First, financial institutions are generally wary of powers of attorney, and a notary may give them some degree of reassurance that the document is valid. Some financial institutions may even require a notary, regardless of state law. Second, if the power of attorney needs to be used in a state that requires notarization, it may not be accepted. Third, if used in certain real estate transactions, the power of attorney must be notarized.
While a power of attorney authorizes financial decision-making on someone’s behalf, a healthcare proxy authorizes medical decision-making. A healthcare proxy comes into effect only if a person is incapacitated or incompetent and cannot make healthcare decisions for themselves.
Everyone should have a healthcare proxy as soon as they turn 18 so that a trusted person can make healthcare decisions on their behalf. If a healthcare proxy does not exist and your adult child becomes incapacitated, the court would appoint a guardian who they believe would act in the best interest of your child. This can be a costly and time-consuming process.
Obtaining a healthcare proxy
Healthcare proxy forms are readily available from doctors’ offices and hospitals. The form does not need to be notarized, but it does need to be witnessed by two disinterested witnesses (i.e., people who aren’t named in the document and would not benefit from the estate of the child). It is helpful to enlist an attorney when establishing a healthcare proxy to help guide you through end-of-life questions and your options.
Unlike a power of attorney and a healthcare proxy, a HIPAA release does not confer any decision-making on behalf of a person, but it does authorize the people named in the document to access protected medical information. In the case of your child, it would grant you access to their medical and billing records, and it would give you permission to speak to their doctors regarding protected medical information.
Does an 18-year-old need a will?
Most 18-year-olds do not have significant assets to pass on to others. If they were to die without a will, “intestate succession” laws would take effect. Each state, and the District of Columbia, has its own intestacy laws that will determine where the decedent’s assets go. If an 18-year-old has specific views on how they want their assets distributed, and those are different than what is outlined in the “intestate succession” laws, then they should consider creating a will.
You have signed documents. Now what?
While the temptation might be to keep the signed originals in a safe-deposit box, it is better to store original documents in a safe place that loved ones can easily access so that agents may perform their duty if the need arises. Copies of each document should be given to each person named in the document.
For a durable POA, consider giving a copy to financial institutions, and for a healthcare proxy, provide a copy to the primary care physician. These documents are all amendable and revocable and should be revisited every few years to ensure the documents are keeping up with life changes.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
