Sylvia Chin
My son, Jared, is the first baby among our MFA team to grow up and be college bound. Like many MFA clients, I had key aspects of my financial plan designed around Jared. We got life insurance coverage based on his age, set up a 529 college savings account when he was still in diapers, and let’s not forget the living trust that detailed guardianship in case something happened to my husband and me.
Now that he has reached a major milestone (adulthood!), what do I need to do to keep my financial plan as relevant and robust as it always has been? Below are some of the things I learned first hand this year that you may find helpful as well.
The first thing to know is that the newly minted adult is no longer considered a minor under the parents’ care. Their personal records may not be easily accessible by their parents should something happen to them. They could be in the ER and the hospital might not tell the parents why they’re there or their medical condition.
To ensure access to timely information, my son set up legal documents to appoint my husband and myself as his healthcare/legal/financial power of attorney (POA). He also signed a HIPAA and FERPA release to allow us access to his medical and educational records. He set up legal documents for both his home state and the state he’ll be studying in. We also made sure we had all the ducks in order before his summer travels (and definitely before leaving for college). Lastly, we stored the notarized documents with MFA so that it’s both secured and could be accessed anywhere, anytime.
The next important thing is to understand what constitutes eligible 529 expenses and how to claim them. Tuition obviously is an eligible 529 expense, but what about peripheral expenses like plane tickets or a new laptop? Do I pay the eligible expenses through my 529 account, or do I get the expenses reimbursed afterwards? MFA has helped many clients through this process – just send your advisor an email and they’ll answer any questions you have on this topic.
Thirdly, now that your child is an adult, you may wish to update your own living trust to reflect that. If you would like your adult child to be your successor trustee or your POA, you’d need to add a restated amendment to your living trust. In addition, if your living trust was set up before the end of 2019, you may want to ask your attorney about adding an amendment to add Secure Act language (pertaining to retirement accounts) to your living trust. The verbiage may allow a beneficiary to withdraw money from a retirement account and count towards the Required Minimum Distribution. That would enable the withdrawal to take place over a longer period of time.
Fourthly, while your grown baby still lives under the same roof, you may want to take stock of the expiration date of your child’s drivers license, passport, Global Entry, etc. Knowing those dates would avoid unnecessary stress when you plan the next family vacation abroad. And, if they don’t have a Real ID, maybe they should get one before heading to college.
My very last tip is to start laying groundwork and introducing your adult child to your various advisors … your CPA, your lawyer, your financial advisor just to name a few. It’s never too early to start building relationships that would help support their lives once they join the workforce. Any MFA advisors would be more than happy to meet with you and your child over lunch and start getting to know them.
This is by no means an exhaustive list … just some precious lessons I learned this year as my baby became an adult. We at MFA are here to walk with you through this important season of life. If you want to talk about any of the topics highlighted above, please reach out to your MFA advisors and let’s talk!