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Few parents greet their children’s 18th birthdays with the joy of crossing a marathon’s finish line, thinking that their job is done. But in some ways, it is. Your 18- year-old may or may not seem like an adult to you, but in the eyes of the legal and financial world, that birthday represents a major shift.

John O. McManus, an attorney and founding principal of McManus & Associates in New York, says that parents need to be aware that once their children turn 18, regardless of how many things stay the same, legally, a lot changes. For example, parents of legal adults are no longer automatically able to access their children’s financial or medical accounts or information, and they won’t be allowed to make medical decisions on behalf of their offspring. However, parents can take steps to smooth the transition into adulthood, and to make sure they can continue to help their kids when needed.

Legal Tasks
McManus says that because parents cannot automatically take action to benefit their adult children in the event they need medical care or are incapacitated, he suggests that families:

• Have their adult offspring complete a health care proxy that give parents the right to make medical decisions if their child cannot.

• Have them assign a durable power of attorney so that that parents can handle financial and legal issues on behalf of their kids if needed.

• Complete an authorization for release of protected health information so that parents can provide this information to medical personnel and use the information to make decisions on behalf of their kids.

“These issues take on extra urgency if your child is away from home in college or out of the country on a semester abroad,” McManus said. In such cases, he recommends learning about the health care system in the country where your child will be living to understand the differences between private and public hospitals and any restrictions on international insurance.

“Colleges will not release a student’s medical records, even to parents, if the student is over 18,” he said. “This may be extremely detrimental to a child’s well- being in a physical or emotional medical emergency. Advance planning can facilitate communication between the foreign hospital and parents.”

Financial Tasks
Hopefully you have been teaching your children about money long before they reach 18, but Ric Runestad, principal of Runestad Financial in Fort Wayne, Indiana, said that once they hit that milestone you should start testing what they’ve learned.

“I’m a proponent of parents co- signing for a credit card with a low limit that only the parents can raise,” he said. “This will give the parents information on exactly what it is their children are spending their money on, and it will also get the child used to the idea of paying off their credit card every month.”

Chris Alberta, principal of Alberta Enterprises in Brighton, Michigan, agrees that parents should open a credit card account with their kids as well as a joint checking account when they turn 18 to help them manage their money.

Financial Education
“Let’s face it. … Today’s young people are financially illiterate, and the modern dilemma has much to do with over-borrowing and lack of financial education,” Alberta said. “So instead of letting them get that firstcredit card on their own and go on a shopping spree, or finance that first car at 20 percent or more, get involved.

Co-signing for anything could put you on the hook for your kids, but it’s much better to be on the hook with the kids. Let them charge their gas, meals out, necessities, etc. By managing charges and opening a joint checking account with them, you’ll be able to see the charges made and make sure the bills get paid each month.”

Alberta says that taking these steps can help your kids build a strong credit history that will make it easier to win an approval for financing for their first car or their first home. “Establishing the difference between needs and wants, along with never borrowing more than we earn, are timeless lessons that every kid can benefit from,” Alberta said.

Runestad also says parents should reinforce the concept of being responsible. “From the age of 18 on, your children are legally responsible for the things they do. If they acquire debt or drop out of college, those choices are theirs alone. Learning to accept responsibility is a huge part of being an adult, and when your child turns 18, this is a great opportunity to have that talk.”

Daily Finance 

December 6, 2014

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