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When should your children start thinking about estate planning?

It's Your Money

Posted: April 3, 2008 4:44 p.m.
Updated: June 4, 2008 5:05 a.m.
 
Many people consider estate planning as something that is only necessary for the elderly or for the rich. I would argue that estate planning is necessary for anyone over the age of 18. Before you stop reading, let me describe some actual incidents that have occurred in the past couple of months that illustrate the need for estate planning by younger adults.

Just last week a friend of mine came to my office with a story about a young couple that had recently purchased their first house. The house was purchased in the husband's name alone for purposes of obtaining the best possible loan. In these cases, the lender requires the spouse who will not be on title to the property to sign a deed giving up their community property rights to the house.

Unfortunately, the husband passed away in a tragic automobile accident, leaving his young wife completely devastated by the prospect of raising their young child alone and without the husband's income. She has also come to the realization that she has another serious problem - she does not own the house that she lives in! Now a long, expensive court procedure will be necessary to transfer the house. I'm sure that this is not what anyone would want to put their loved ones through at a time when are trying to cope with such tragedy.

A couple of months ago, I received a phone call from a frantic mother whose 18-year-old daughter is a freshman at a college in New York.

The daughter's roommate had called the mother to inform her that her daughter had become ill and was taken by ambulance to a local hospital. When the mother called the hospital, she was told that her daughter had been admitted but they could give her no further information about her condition. The mother was told that because her daughter was an adult, they were prohibited from releasing any information about her condition without proper authorization from the daughter, who was not in a condition to give such authorization.

All young adults need at least two important documents upon reaching the age of 18. A durable power of attorney will allow someone to be able to step in and handle financial affairs if the young adult becomes incapacitated. An advance healthcare directive will allow you to get access to your child's medical information and make healthcare decisions for them. If your child has assets, a simple will or trust may also be necessary.

Both of these situations were made worse because the young adults had not done proper estate planning. As parents, we all try to help our children become responsible adults by teaching things like how to balance a checkbook, manage credit cards and buy insurance. Proper estate planning is another important lesson that is often overlooked.

Hopefully, none of these documents will be needed for a long time, but if they are needed, you and your child will be properly protected.

Randall D. Armour is an attorney and licensed real estate broker. "It's Your Money" appears Thursdays and rotates between a handful of the valley's financial professionals. His column represents his own views, and not necessarily those of The Signal.

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