If you are the parent of a college-bound student, you may soon face a whole new world of an empty nest, financial aid and questions about doing laundry. What you might not realize, though, is that with this new transition, there are some important considerations you need to keep top of mind, specifically life insurance and updating of legal documents.
Here are my tips (besides never mix your whites and darks) as your kids leave the nest.
Life insurance needs
Although it is not top of mind during this exciting time, it is important to make sure you have the right level of life insurance coverage.
No one wants to think about the unthinkable, but you might want to increase your own life insurance coverage or obtain coverage on your student if:
- Your current coverage would not be sufficient to pay off student loan debt and meet the surviving spouse’s other financial needs, too.
- You take out a Parent PLUS or home equity loan.
- You co-sign with your child on a student loan.
Legal document needs
Strange as it may sound, if a college student age 18 or older is hospitalized while at school and is unable to communicate, the parents might not automatically have the right to tell doctors and hospital staff what medical procedures to use or not use. Also, if the adult student is not able to communicate for an extended time, parents might not be authorized to move funds from the student’s accounts. As legal adults, students over the age of 18 need their own advance medical directives, health care agent form and durable power of attorney for financial management, naming those who could legally act on their behalf. Below are some key terms and ideas to discuss with an attorney to ensure you’re prepared in the event that your child is incapacitated.
- Advance medical directive – Allows you to plan your health care before you may be unable to make sound decisions yourself.
- Health care agent form – Allows you to appoint another person to make your health care decisions for you if you are unable to communicate them yourself.
- Durable power of attorney for financial management – Gives someone the right to make financial decisions on your behalf if you are unable to do so.
Leaving for school opens up a whole new world for both children and their families. By taking a few minutes to review your financial and legal situation now, you will be prepared for this new stage of your life.