By: Vanessa McElwrath, CFP®, Wealth Management Partner
As summer is wrapping up and the fall semester is quickly approaching, many parents are frantically trying to help their soon-to-be college student buy dorm furniture and sign up for classes. Through the excitement and nerves, many parents lose sight of important steps to take to avoid potentially scary and painful situations. Here are some tips that parents should take to ensure their child is adequately protected when they go off to college.
Get your legal documents in place.
In many states, a parent of an adult child that is 18 or older is legally considered a stranger, even though you may pay their tuition or claim them as a dependent on your tax returns. Before your son or daughter moves on to their freshmen year of college, a gap year, or a year abroad, you want to ensure that your child, now 18 and technically an adult, is adequately protected in the event of an emergency. If your child were to become critically ill or get in an accident, you would have a very difficult time obtaining important medical and financial information or making critical decisions on their behalf.
Before your son or daughter heads off, I would recommend that you reach out to an attorney to help you execute a durable power of attorney, a medical power of attorney, and a HIPAA release for each adult child.
A durable power of attorney would give a parent the ability to sign papers on the child’s behalf and have access to financial accounts and other information, such as grades, if the adult child became incapacitated. A medical power of attorney and a HIPAA release will allow a parent or guardian to obtain medical information and make health-care decisions when a person is incapacitated or unable to make decisions on their own.
It can be emotionally gut-wrenching to think about these worst-case scenarios in which you would need to enact these papers, but the alternative is much worse. If your child becomes ill or is an accident, you want the ability to obtain information and start making potentially lifesaving decisions as quickly as possible.
Establish a monthly budget.
Once your son or daughter flees the nest, they will encounter newfound freedom and the opportunity to make numerous decisions without your input or consult daily. Will they go to that 8am class or sleep in? Will they go out to eat for dinner or dine on their prepaid meal plan? Before you send your child off to school, you should set clear expectations to help them spend money responsibly. You want to give them the ability to hone their decision-making skills but within clearly defined parameters. As a starting point, collaborate with your son or daughter to map out a monthly budget. You should also outline and specify who will pay for what expenses. Perhaps the parents will cover all school-related expenses, but the child will be responsible for some or all social expenses. You also want to set some rules on using debit and credit cards. Unfortunately, many banks and credit card companies love to lure young college students with the promise of a free to dinner to sign up for a credit card. The best course of action may be to designate a debit card for most expenditures, but you can give them a credit card for use in emergency situations. Just be sure that you have online access to the account and that it has a relatively low credit limit.
Update your insurance.
Now is also good time to talk to your insurance agent and ask about covering your child’s belongings while they are living on or off campus. There are a lot of affordable options when it comes to renter’s or dorm insurance. If your child is not taking a car with them on campus, let the insurance company know as this could potentially drop your rates.
While it is expected for parents to experience some level of anxiety as their child moves on to college, having the proper planning and documentation in order can provide peace of mind and help ensure, should a scary situation arise, you and your family are well prepared.
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