Often, people pursue creating an estate plan or updating their estate plan when they have children or are approaching their retirement years. Their estate plan can involve powers of attorney, health care directives, Wills, trusts, and beneficiary designations on accounts. The estate plan not only covers what happens to the person’s property at their death but also includes identifying agents to handle the person’s medical, financial, and legal affairs, if needed, while they are alive. Nevertheless, one of the most frequently overlooked age groups when it comes to estate planning is young adults, such as college students. Having an estate plan as a young adult is as important as having an estate plan at any other time in a person’s life.
Consider this situation: Julie is a 20-year-old sophomore at the University of Minnesota in Minneapolis, Minnesota. She is studying biology and lives with a roommate in a rented apartment. The apartment lease and the utilities for the apartment are in Julie’s name alone. The Honda Accord she drives was a gift from her parents, and Julie is the sole owner on the vehicle title. She owns several musical instruments and rents a storage space on campus to store these instruments. She has a credit card and checking account that she uses to pay her bills. One evening while driving home to her apartment from a band rehearsal, a car driven by a sleepy driver runs through a red light and collides into Julie’s car. Julie experiences serious injuries that have left her unconscious. Currently, Julie is in intensive care at the hospital, and it will take several months of recovery before Julie would have the capacity to sign legal documents. Julie does not have any estate planning documents in place.
Without any estate planning documents, how will Julie’s parents handle the following matters:
- How will Julie’s parents find out about the collision?
- How will Julie’s parents find out information about Julie’s condition given the health care privacy laws?
- Who will have the legal authority to make decisions about Julie’s health care?
- Who will have the legal authority to deal with the landlord, roommate, and utility companies on Julie’s behalf with regard to the apartment?
- How will her parents be able to check on the status of Julie’s credit card and checking account if needed?
- Who will be able to handle having the vehicle repaired or selling the vehicle?
- How will the parents get access and control over her musical instruments if needed?
- Will the parents be able to access Julie’s grades and academic reports?
- Will the parents be able to correspond with university personnel about Julie’s academic situation?
- If Julie has a claim against the other driver, who has the authority to pursue this claim against the other driver on her behalf?
The questions above highlight how quickly Julie’s parents could find themselves unable to help their daughter without having the proper documents in place.
In order to alleviate these issues, young adults, at a minimum, should have a power of attorney and a health care directive. A power of attorney is a document in which the young adult identifies an agent to perform legal and financial actions on his or her behalf. The young adult does not give up any rights by signing the document; but instead, shares these rights with another adult, such as his or her parents. For example, if Julie had named her mother as her agent under a general durable power of attorney, her mother would have the legal authority to deal with the landlord about the lease. A general power of attorney provides an agent with broad powers to handle a wide range of legal and financial matters on the young adult’s behalf. A “durable” power of attorney ensures the agent will retain his or her powers to act on behalf of the young adult even if the young adult is incapacitated.
A health care directive is a legal document in which a young adult names a health care agent to make medical decisions for the young adult and in which the young adult provides instructions (directives) to the health care agent about the young adult’s medical care. The agent’s authority under the health care directive does not come into effect unless the young adult cannot communicate with his or her medical providers. The agent’s authority typically includes the right to access the young adult’s medical information. For example, Julie could have named her parents as her health care agents in a health care directive, which would have given her parents access to her medical information and the ability to make decisions about her treatment and care.
In addition to a health care directive, a young adult also could sign a Health Insurance Portability and Accountability Act (HIPAA) release authorization, which would grant another adult access to the young adult’s medical information even if the young adult is not incapacitated. In comparison, health care directives also contain a HIPAA authorization, but that authorization does not come into effect until the person is incapacitated. In analyzing the use of these two forms, the young adult will have to consider when he or she would want his or her agent to have access to his or her medical records.
Although many young adults have limited assets and many state laws leave the estate of a young adult to their parents by default, a young adult may want to consider executing a Will in certain circumstances. For example, if a young adult has inherited a significant asset or has biological parents and step-parents, the young adult can use the Will to dictate who will receive his or her assets and which parent will serve as the personal representative of his or her estate.
For a young adult attending college, the young adult also should consider signing a Family Educational Rights and Privacy Act (FERPA) release authorization to allow his or her parents access to the young adult’s academic information. All colleges and universities should have FERPA release authorizations available. On the one hand, the young adult may consider this release an invasion of privacy. On the other hand, parental access to this information could be very beneficial in assisting the young adult with the stresses and challenges of college life or in dealing with university personnel due to an event in the young adult’s life, such as the accident in Julie’s situation.
In light of the above, young adults should implement an estate plan. Having legal documents, such as powers of attorney and health care directives in place, will ensure that the young adult has the necessary agents available to help him or her in his or her time of need. Depending on the situation, implementing a Will, updating beneficiary designations, granting parents access to medical and academic information also may be a prudent action for a young adult. The young adult always maintains the ability to remove, amend, or modify these documents at any time as long as the young adult has the requisite mental capacity.
The attorneys at Ohnstad Twichell, P.C., provide multi-generational estate planning services to families and individuals of all ages and look forward to assisting young adults with implementing their first estate plan. Please contact us at 701-282-3249 to schedule an appointment.