Four overlooked issues to consider when your child moves out
As your adult child moves out to attend college or to join the workforce, there are some crucial issues that parents often overlook in all of the effort and excitement. But with the right preparation, you can steer clear of most unpleasant surprises.
1. Preparing for medical emergencies.
One of the scariest situations for parents is receiving that dreaded call about their child being rushed to the hospital. It becomes even more nerve-wracking when medical privacy laws prevent medical personnel from discussing your adult child's condition with you, now that they are legally independent.
To avoid this nightmare, it's essential to have the right documents in place. Encourage your adult child to sign a HIPPA release form, granting medical personnel permission to share medical information with you in case of an emergency.
Additionally, a medical power of attorney can empower you to make crucial medical decisions on their behalf if they are unable to do so. Lastly, consider a living will, outlining your child's treatment preferences in end-of-life scenarios.
2. Choosing the right health insurance.
While you can keep your child on your health insurance until they turn 26, it might not always be the best option. If they're moving away, their access to your network of doctors and hospitals may be limited. It's worth exploring alternative plans offered by their new employer or educational institute, which could be more cost-effective. Make sure to compare options and remove them from your insurance if a better alternative is available.
3. Preparing for financial changes.
Your child's departure can have financial implications. If they're starting college, you might face significant bills, but you could also qualify for tax credits or deductions.
If they're entering the workforce, you may lose a tax deduction and need to adjust your tax withholdings at work. This could also be an opportunity to enhance your retirement savings if your overall cash flow improves. Review your financial and tax situation to make sure you avoid surprise tax expenses and take advantage of any new opportunities.
4. Reviewing your estate plan.
Now that your child is an adult, you might want to adjust your estate plan accordingly. Consider signing your own HIPPA release form or medical power of attorney, so your child can be informed and involved during your health care emergencies. Also decide if you want to update your will to designate your adult child as a guardian for their younger siblings. And determine if your adult child is ready for the responsibility of receiving their inheritance, and make any changes to your estate planning documents if necessary.
By addressing and discussing each of these key areas, you and your child will be setting the stage to transition well into adulthood together. As with any big decision it is wise to consult with the appropriate professional as necessary.
• Jim Uren, CFP ®, is an adviser at Phase 3 Advisory Services, Ltd. In Buffalo Grove.
Securities offered through Osaic Wealth, Inc., member FINRA/SIPC. Investment advisory services offered through Phase 3 Advisory Services, Ltd., a Registered Investment Advisory Firm. Osaic Wealth is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic Wealth. Osaic Wealth does not provide tax or legal advice.