My Daughter’s Surprise 18th Birthday Present: Not what she expected, but it will keep on giving

estateKey Takeaways

  • Once your child turns 18, the law prevents you from making certain important financial decisions on his or her behalf.
  • Purchase basic estate documents for your child: will, durable POA, healthcare POA.
  • Help your child select a credit card (with reasonable limits and rates) to establish a credit history.

For further reading on estate planning for your children, see this recent Bloomberg article in which I was featured.

I recently asked my daughter, “Guess what you’re getting for your birthday?”  “A car? Jewelry? A new phone”, she guessed excitedly.  “Nope”, I said, “estate planning documents.”  “Seriously Dad?” she said.  “Seriously”, I said. “You can’t enter adulthood without the proper documents.”  Such is the life of a wealth advisor’s child.

Estate documents 

As many of us already know, human children depend on their parents for a longer period of time than any other species on the planet does.  My wife and I will have responsibility for our 18 year-old daughter for many more years, but the law doesn’t view it that way.  If my daughter was incapacitated, I could not take over her checking account or pay her bills.  If she became incapable of making her own medical decisions, my wife could not step in and make them for her.  If my daughter passed away without a will, our home state, Pennsylvania, would distribute her assets according to a schedule that I might not agree with.

When your child turns 18, it’s time to get a suite of estate documents in order:

  • A will.
  • A durable power of attorney.
  • A healthcare power of attorney.

The will specifies how your child’s assets will be distributed at death.  The financial durable power of attorney designates another person to act on the child’s behalf for all financial matters.  The healthcare durable power of attorney designates another person to act on the child’s behalf for all healthcare related matters.  These are the basic estate documents that will allow you to step in when the unthinkable happens. Generally, an 18 year old child’s situation is fairly simple and assembling the estate planning documents you need on their behalf should be fairly inexpensive.

Credit card

While I didn’t have to purchase a credit card for my daughter, I did help her select a good credit card so that she could begin to establish a credit history.  The longer a child’s credit history, the better. So, help them establish a good credit track record as early as possible.  Having a good credit history will save you and your child money because they’ll pay lower interest rates on their charges.  And having a good credit history will make it much easier for them to purchase a new car or a new home later on in life. Every child is different and only you can determine how much credit they can handle responsibly and how often you will need to monitor their expenditures.

Conclusion

It’s both difficult and wonderful to see your child grow up. Establish good habits by taking your child with you to an estate attorney and by purchasing estate documents.  Also help your child establish good spending habits and create a credit history by helping them to select the right credit card. If you’d like to discuss this further, please don’t hesitate to contact me.

Parenting is a lifelong responsibility. I hope this post helps you in the transition to parenting a young adult.

About Mark Rioboli

Mark A. Rioboli, CFP®, CFS is Director of Wealth Management for Independence Advisors, bringing over 25 years of experience in the wealth management industry. Have a question for Mark? CLICK HERE TO ASK MARK

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