Don’t Send Your Child Off to College Without These Four Tools

Preparing your child for college is an exciting but often hectic time. Between the college applications, housing forms, class registrations and meal plans, there is a lot to manage. One crucial aspect that is often overlooked, but should be included on every parent’s college checklist, is estate planning.

Why Estate Planning Before College Matters

Though your child will always be your baby, that is about to change in the eyes of the law. Once your child reaches the “age of majority” (which is age 18 for most states), the child is legally considered to be an adult; beyond that age, a parent/guardian is no longer entitled to see their child’s financial and medical records.

As such, it is crucial to have certain estate planning documents in place, designating a parent/guardian with the authority to act on their child’s behalf, should their child no longer be able to do so. The items below should be discussed and in place prior to a child leaving for college.

Medical Documents

1. Health Insurance Portability and Accountability Act (HIPAA) Release Form: This is a legal document which allows an individual to grant permission for their protected health information to be accessed by authorized individuals. This form does not convey decision-making responsibilities; rather, it provides authorized individuals with access to medical records, health status and treatments. 

2. Health Care Proxy: This form designates a “proxy” to act on one’s behalf for health care matters. If your child designates you with this authority, you will have the ability to view your child’s medical records and to make informed medical decisions on his/her behalf. It is important to note this form comes into play in the event your child is incapacitated or incompetent to make their own medical decisions.

Financial Documents

3. Durable Power of Attorney: In the worst-case scenario that your child was incapacitated and unable to make decisions for themselves, you (as a parent/guardian) would want to have a durable power of attorney in place. In this case, acting as the “agent,” you would be authorized to make financial or legal decisions on your child’s behalf. There is also the possibility that your child does not have the time or want to take on the financial responsibilities of adulthood; as such, this could be a potential consideration if you prefer to gradually introduce your young adult to financial responsibilities, such as filing taxes and managing financial affairs.

4. Simple Will: While it may seem unthinkable for a young person just beginning their college years, it is also recommended to have a will in place, especially if they have significant assets. Without a will, “intestate succession laws” take effect and decide where your child’s assets will go. A will helps avoid any confusion and clearly states how assets should be distributed.

Financial Strategy

Setting up your child to make sound financial decisions early on can put them on a path for future long-term success. Here are a few additional considerations to keep in mind.

  • Find the right banking institution for your student. This will not always be the school-sponsored bank account. A 2016 Consumer Financial Protection Bureau (CFPB) report found many of these institutions contained large overdraft, ATM and maintenance costs.1 Do your research and look for student checking accounts that offer low-to-no fees.
  • Take advantage of the FAFSA (Free Application for Federal Student Aid). This application can qualify the student for federal grants, work study positions and state scholarship programs. Some colleges might also require the FAFSA before awarding students certain college-based aid, including merit scholarships and grants, so filing it can be beneficial, even if a student does not plan on taking out any federal loans.
  • Have your child obtain a credit card but emphasize responsibility. Building credit early in life is important. It will also teach your child to pay off credit on time and will ideally help them develop good financial habits. Having a good established credit history will also be of importance for later in life when your child applies for auto loans, rental agreements and mortgages.
  • If student loans are necessary, carefully evaluate all options. There are differences between private and federal student loans. Federal loans often come with advantages that private loans do not, such as loan forgiveness circumstances, income-driven repayment plans and options to defer payments.

Academic Records

Often overlooked, The Family Educational Rights and Privacy Act (FERPA) is a federal law that grants parents the right to access their children’s education records, request that those records be amended, and control the disclosure of personally identifiable information from the records. However, when a student turns 18 or enters a postsecondary institution at any age, these rights transfer to the student. Under FERPA, this means that parental access to a student’s academic records—including information about courses, tuition, and disciplinary matters—requires the student’s written consent.

Where to Begin

Start by reviewing your financial plan, estate documents, and insurance coverage as life events occur and your family’s needs evolve.

As early as possible—even before high school graduation—set aside time as a family to discuss the importance of these matters and the documents that will enable you, as a parent, to access information and support your child, especially in the event of an emergency.

Print our checklist to help guide these discussions

1.Top Financial Tips For New College Students – Forbes Advisor. September 2021

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To get the ball rolling, send an email to hfsletstalk@heritagefinancial.net or complete this form.