While not exactly a “traditional” gift for a high school graduate, paying for the creation of an estate plan for a young adult can have long term benefits for both the grad and their family. If you have a child, grandchild or other relative who recently graduated or reached age 18, an estate plan is a practical gift that can deliver a lifetime of value. Here are three reasons why:
1. Health care protection. Once an individual attains the age of majority (which is 18 years old in most states) privacy laws come into effect. This means that parents or guardians no longer have the legal ability to make financial decisions for the young adult, nor can they access school records or other protected data – even if they continue to pay tuition! More critically, they cannot access medical information or even speak to a health care provider. This can create a potentially life-threatening situation should the young adult suffer an illness or fall victim to an accident.
However, a parent or guardian may be granted medical power of attorney through an advance medical directive (AMD) with a HIPAA provision that is part of an estate plan. The AMD will allow a designated representative (typically a parent or parents) to communicate with the young adult’s healthcare provider and make medical decisions on their behalf should it become necessary. This could be a life saver.
2. Financial protection. Just as a parent or guardian loses control over a child’s healthcare decisions once they reach age 18, the young adult’s financial life is also “off limits” unless access is specifically granted. This comes in the form of a general durable power of attorney that appoints an agent (or agents) to make decisions on behalf of an individual, including financial decisions. The general durable power of attorney may include granting access to bank accounts, scholarship funds, rental agreements, student loan agreements and similar accounts. The access can be restricted to be used only when the young adult is incapacitated, or it can be broadly granted to go into effect immediately.
3. Early savings incentive. An estate plan can encourage a young adult to take a much longer view of life than is typical of an 18-year old. Gaining an understanding about and appreciation of the power of compound interest can lead to good financial habits that can last throughout the recipient’s life. That applies whether the young adult is heading off to college (in person or virtually), entering the workforce, or starting a military career.
An estate plan prepared at any age should be drawn up by a team that includes an attorney, tax advisor and financial advisor. Documents should be kept secure, yet accessible to the appropriate parties through digital means. Having an AMD that can be downloaded from the cloud when needed can save time and anxiety.
For additional information about gifting an estate plan for a loved one, please contact Gray, Gray & Gray at (781) 407-0300.