College is more than a formal education. It is also a time for “young adults” to become financially literate and take responsibility for their finances. However, during this transition parents often still pay for tuition and expenses, and yet simultaneously lose all authorization to legally make decisions for their children if they are over the age of 18.
Have A Power of Attorney On File
If children have their own credit card, financial accounts and bills, it is valuable to have a power of attorney on file. This would allow the parent to access and assist if the child were suddenly unable to make or communicate decisions. If the child were suddenly incapacitated, went missing, or simply needed assistance, the parent would even be able to get access to cell phone or other records which may be critical in locating or helping the child. We generally recommend formally establishing a power of attorney on their accounts, instead of owning financial accounts jointly with your children. Please consult your tax professional and/or attorney for specifics on how this may impact you.
Have Your Child Sign A Health Care Proxy or Directive
Second, have your child sign a health care proxy or directive. Once your child turns 18, you are no longer legally allowed to make decisions regarding medical care or have access to medical records, absent a legal document or court order. Getting a legal document now allows you to eliminate the potential expense, hassle and time delay of trying to obtain a court order. Unfortunately, accidents are the leading cause of injury and death in individuals from age 18-25.
Consider Liability Exposures
Finally, consider the liability exposures to your financial position (and your child’s) when you have a college-aged child. Consult with your attorney before purchasing real estate that you will own, where your child will live alone or with other roommates, and update your personal liability coverages to ensure adequate coverage against any potential lawsuits.
Most homeowner policies will offer some coverage for students away at school. As long as your child is a full-time student and a dependent member of your household, your homeowners policy should automatically extend some coverage to a new dorm location. Things get trickier when living off campus. If your student is housed outside of the school dorm, you need to be sure the new location is specifically listed on your homeowner’s policy to protect you and your student (especially if you have co-signed a lease.) Generally, a homeowner’s policy will also provide up to 10% of your personal property coverage limit to cover your child’s belongings at a college location, subject to the policy deductible. It is important to note the internal policy limits for jewelry, sports equipment and electronic devices as these are the items most often stolen on college campuses.
While you might be tempted to remove your college student from your auto policy while away at school (with no vehicle) in order to save premium, this is often not the best decision, as the nominal cost savings is not worth the protection you would lose. Keeping your child insured on your personal auto policy will allow your child to drive your cars when returning home, maintain liability coverage as a driver while operating a friend’s vehicle at school, and will protect your child if she or he is struck by an uninsured motorist while walking or cycling. There are additional discounts available to students that maintain a 3.0 grade point average and/or are over 100 miles away from home, further reducing the insurance costs.
We encourage you to contact a Client Advisor with any questions.
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