While characteristics of full-fledged adulthood may still seem distant, the law bestows certain rights onto your child at this age, such as gaining control over financial accounts in their name. And while they gain rights, you lose certain privileges, like access to their educational records and medical information.
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This rite of passage can bring many changes and there are steps families may want to take. Let’s explore seven actions to consider when your child turns 18.
1. Sign a FERPA Release
The Family Educational Rights and Privacy Act (FERPA) is a federal law granting parents specific rights regarding their children’s education records.
These rights include:
- Access to their children’s education records,
- The ability to seek amendments to these records,
- Some degree of control over the disclosure of personally identifiable information from these records.
However, when a student turns 18 or enters a postsecondary institution at any age, these rights under FERPA transfer from the parents to the student.
If you and your child agree that you should still have access to their education records, complete a FERPA release form and return it to your child’s school. This form is usually available through your child’s school or online.
2. Sign a HIPAA Waiver
The Health Insurance Portability and Accountability Act (HIPAA) prevents anyone not named in a signed release from receiving medical information about another adult. Once your child turns 18, you won’t be able to gain access to their medical status.
Signing a HIPAA release form gives you the right to your child’s medical information. If your child is hesitant to give you rights to all their medical information, they can limit the extent of your access.
Keep in mind that a HIPAA waiver only permits access to information, not the ability to make medical decisions – that requires a medical power of attorney.
3. Establish a Medical Power of Attorney
After your child’s 18th birthday, you no longer have a say in their medical treatment. Even if your child gets into a car accident and someone needs to make important medical decisions, you can’t do so.
Your child may still be on your health insurance plan, but unless you have a medical power of attorney in place, a judge makes decisions about your child’s care.
A medical power of attorney allows your child to name you as their healthcare agent. This power only comes into effect if your child is unable to make their own medical decisions.
4. Draft a Living Will
A living will states your wishes on how you want to be treated if you’re terminally ill, seriously injured, in a coma, or mentally incapacitated. It also includes your end-of-life decisions, such as life support treatments and organ donation. Your child may want to create one if they have strong convictions about what they want.
Without a living will, the medical power of attorney will give you, the parent, the right to make healthcare decisions, but these decisions may not be what your child wants if they never made it known.
It makes the most sense for your adult child to create the living will and medical power of attorney at the same time.
Use our estate planning guide and checklist to make sure your financial plans are in line with your wishes.
5. Create a Durable Power of Attorney
Despite becoming a legal adult at 18, chances are your child still needs financial support. A durable power of attorney allows you to manage your child’s finances if they cannot due to circumstances like traveling abroad or incapacitation.
By naming you their power of attorney agent, you’re allowed to access bank accounts, sign tax returns, renew car registration, and perform other transactions. If your child is not comfortable giving you full access, they can limit what you have access to.
6. Review Financial Accounts
If you or family members have opened financial accounts for your child under the Uniform Transfer to Minors Act, your child will gain unrestricted access upon turning 18. However, not every 18-year-old is ready to manage large sums of money.
If you believe your child may misuse their account, seek advice from a financial professional. They can guide you on transferring UTMA accounts into more restrictive ones, provided they still benefit your child.
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7. Review Life Insurance Policies
As your child steps into adulthood, it’s an opportune time to revisit your life insurance arrangements.
Do You Want to Update Your Beneficiary Designations?
Life insurance is usually purchased to financially protect loved ones, usually your spouse and children. However, naming minors as beneficiaries isn’t recommended. With your child having reached legal adulthood, you now have the option to include them as a beneficiary.
Consider a situation where your current life insurance policy only lists your spouse as the beneficiary. If you both were to pass away unexpectedly, your death benefit proceeds could be held up in probate court, leaving your child in an insecure financial situation.
By adding your now-adult child as a secondary beneficiary, you can rest easy knowing that they will receive financial support directly from your policy. However, the maturity level of your child is a significant factor to consider since they might inherit the benefits sooner than anticipated.
Did You Purchase a Child Rider?
If you included a child rider when you purchased your life insurance policy, its coverage expires once the child reaches a certain age, typically 18-25 depending on the insurer. But you can convert this rider into a standalone permanent policy for your child if you desire.
If your child developed significant health issues or found themselves in legal trouble causing them to likely be uninsurable in the future, converting the rider may be in you and your child’s best interest.
Did You Purchase a Children’s Whole Life Policy?
Perhaps when your child was younger, you bought a children’s whole life insurance policy for them. Some of these policies automatically transfer ownership to the child when they reach adulthood, while others give you the option to do so.
Even if you believe that your child isn’t ready to take ownership of their life insurance policy, teach them about the policy’s value and how your own life insurance policies are designed for their protection as well.
Considerations for Your Life Insurance
In addition to your child now being a legal adult, your life has likely seen many other changes since you first purchased life insurance. It’s time to review your own coverage.
Shifting Financial Responsibilities
- Education: If you’ve successfully funded their college education, you might find that your required life insurance coverage is less compared to when your children were younger.
- Long-term support: Conversely, if you plan on providing long-term financial support, such as for postgraduate studies, a wedding, or a business venture, your coverage needs might remain high.
Evolving Financial Goals
Financial protection for your family was likely why you bought coverage in the first place. However, as children grow and become financially independent, your priorities might change:
- Retirement planning: With your children grown, you may now need to shift your focus to ensuring a secure and comfortable retirement.
- Caring for aging parents: The responsibility of caring for aging parents can also impact your life insurance needs, potentially requiring additional coverage.
- Charitable causes: Perhaps you’re interested in leaving a legacy through charitable donations. If so, life insurance can be an effective vehicle for achieving this goal.
The cost of term life insurance has decreased in the last 10 years. Are you paying too much? Review the average life insurance costs.
Reevaluating your life insurance is a critical part of adjusting to the reality of your children growing up. It can help ensure that you continue to protect your loved ones and secure your financial goals effectively.
If you’re in need of some unbiased advice, we can help. As an independent broker, Quotacy is your advocate in the life insurance world.
If you’re uncertain about your life insurance coverage, contact us and an agent would be happy to go over your situation with you and provide customized options.
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