November 19, 2015
Private Clients Alert
Upon turning 18, a person is legally considered to be an adult, even if still dependent on his or her parents for financial support (or for making dental appointments!). This means that parents lose the ability to make certain financial and medical decisions on behalf of their child. Young adults can benefit from establishing a basic estate plan that includes:
In a durable power of attorney, the young adult (“principal”) grants a designated agent the authority to make decisions regarding his or her financial assets. The power of attorney becomes effective when it is signed and may be revoked at any time while the principal is competent. An agent can act in a principal’s stead in a wide variety of financial matters, such as withdrawing money from a bank account, paying bills and filing tax returns.
A power of attorney can be particularly helpful while a child is away at college, traveling or studying abroad for a semester.
A health care proxy allows the young adult (the “principal”) to name an agent (or “surrogate”) to make health care decisions on his or her behalf. A health care proxy does not become effective until the principal is incapable of making his or her own health care decisions, and the principal may revoke it at any time while living and competent.
In an emergency situation, the designated agent (typically a parent of the young adult) can make medical decisions on the principal’s behalf and will be given access to the principal’s medical information. This is important so that the agent can make informed decisions on the child’s behalf. Without a health care proxy in effect, parents may encounter resistance from doctors or other medical personnel when the need arises.
A health care proxy may also include a “declaration of wishes” or a “living will,” which provides guidance to the health care agent when acting on behalf of the young adult.
Whether or not a young adult has significant assets in his or her name, it is still important to have a will. In the event that a young adult dies without a will, the laws of intestacy determine how his or her property will pass. When property passes pursuant to the laws of intestacy, the disposition may not reflect the young adult’s wishes and may also “disrupt” the estate and gift tax planning of the young adult’s parents.
If a person dies without a spouse or children, that person’s property will usually pass to his or her parents under the laws of intestacy. This is generally not the preferred disposition, particularly if the parents already have significant assets, or have gifted assets to the child in order to reduce the parents’ taxable estates. On the other hand, if a young adult is married at the time of his or her death, then all of the young adult’s property will generally pass to the surviving spouse without some further planning. A will allows the young adult to control the disposition of his or her property.
Our Private Clients attorneys have experience meeting the needs of multigenerational families. We will work to establish a plan that will be practical and will provide a solid foundation for the future.
The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.