personal finance

Legal Advice for Parents with Kids in That ‘Awkward Stage’ of Semi-Adulthood

Your child is over 18 and legally an adult, but still your dependent. Say he’s away at school and is in a car crash. Would you have the right to talk with his doctors or deal with his bills? You need the proper paperwork in place to make sure of it.

My son was so excited to begin his freshman year at college in Savannah in autumn 2019. But COVID-19 forced the school to close just after its spring break, and he’ll be attending classes over Zoom through this summer. We have really enjoyed having him home, but he will finally be able to return to campus this coming fall term for his junior year.

He became a legal adult even before he graduated high school. Since turning 18, he has enjoyed all the legal rights of an adult (save buying liquor) and all the legal liabilities and responsibilities, but he is still in that in-between period of semi-adulthood. He is financially dependent on us, since we are paying for his health and auto insurance and his college tuition and housing costs. The Affordable Care Act requires that my group health insurance plan cover him until age 26, and income tax rules allow me to claim him as a dependent through the year he attains age 24.

But since he is an adult, I cannot access his college or medical records, or stand in his place in relation to any public programs or private subscriptions, contracts or transactions, without his written permission. And that written permission must be granted in uniformity with state or federal law and, many times, the corporate requirements of the affected institution, such as a hospital, bank or college.

What am I to do if he is injured in an auto accident and admitted to a hospital in Georgia? How would I monitor or direct his care? How would I recover his vehicle or preserve his personal property? It is easy to imagine the countless situations where I would have difficulty helping him without the proper paperwork.

Legal options for managing complex situations

State law provides the answers through a financial power of attorney and patient advocate designation (sometimes referred to as a medical power of attorney or advance directive call — POA for short). His financial power of attorney gives me the authority to act on his behalf on all legal and financial matters, while the patient advocate designation gives me the authority to make medical decisions for him while he is incapacitated. In an extreme situation, even if my son has previously executed the POA, I may still need to file for guardianship or conservatorship under certain circumstances, or even establish a Supplemental Needs Trust so he may qualify for public assistance, but his well-drafted POA makes that process easier.

A POA with robust powers provides for the management of the principal’s legal and financial affairs with similar authority to that of a conservator, but with more freedom and latitude. Generally, the agent under a POA does not have to report to the court on his or her actions. My adult child’s POA includes authority to handle college accounts, banking, real estate and rental agreements, retirement accounts, insurance policies, investment accounts, government entitlement programs, and the creation and amendment of trusts and estate planning documents.

The POA specifically contains the required waivers for the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The ability to amend or create a trust for him, including a Qualified Income Trust and a Special or Supplemental Needs Trust, may be essential to his long-term care if he suffers a severe or permanent impairment or disability. A document without this authority would inevitably force me to file for guardianship.

Other considerations for power of attorney

Third parties, including banks and medical offices, are generally required by state law to accept POAs that have been notarized, but even still, it is advisable to take that POA to all known institutions for approval and complete those institutions’ forms while the principal is able to give his consent. Also, if your student attends school in another state, like my son does, his or her POA must comply with the laws of every state in which it may be required. Therefore, it is a good idea to include two attesting adult witnesses and a notary public certification, even though your state law may not require such formalities, since some states still require witnesses for a POA.

If my son eventually needs to file for Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI) benefits, Medicaid or other public assistance, I can present that POA and request to qualify as his Representative Payee to file his applications, manage his benefits, file his annual reports, and receive statement and tax notices on his behalf.

In addition to executing a strong POA, I need to ensure that my son has access to a strong support network in case anything happens where his parents can no longer serve as his POA. A supportive network may include our siblings, who are willing to advocate for my adult child if we cannot. My own estate plan includes a trust that will merge with any trust I may have to create for my son under the POA, including a Supplemental Needs Trust.

How Supplemental Needs Trusts work

The history of the Supplemental Needs Trust began with the Omnibus Reconciliation Act of 1993, which established that trusts — revocable or irrevocable, established by an individual, or by court order — must be included as income or available resources to reduce or eliminate eligibility for means-tested benefits unless certain rules are followed. Most government benefit programs, including Medicaid and SSI, will exempt a special needs trust as a resource if the beneficiary cannot compel distributions from the trust and the trust can only be used for the beneficiary’s supplemental needs, and not for support.

To qualify under these rules, a Supplemental Needs Trust must serve just one beneficiary for life, include specific terms and legal references, provide certain trust powers and limitations, and weigh the loss of eligibility against the benefit of each non-supplemental distribution. The various federal and state programs usually cover housing, food, utilities, medical care and medicines. A Supplemental Needs Trust can pay for all non-covered medical, ophthalmological and dental care, private rehabilitation training, services or devices, supplementary education assistance (including college tuition and fees), entertainment, hobbies, transportation, personal property and personal services.

The rules governing trust distributions are very strict. Structuring a successful Supplemental Needs Trust requires counsel experienced in state and federal program laws, a clear understanding of the state office’s interpretation of the regulations and local program directives, an informed relationship with the local program decision-makers, and continuing education in this practice area and in drafting these complex trusts.

Where to start

 A qualified trustee has the expertise to maneuver the labyrinth of public assistance programs, knows when to seek legal counsel, clearly understands how the trust’s terms and program regulations interact, and confidently determines how and when to make distributions that are clearly in the beneficiary’s best interest. For guidance and to find qualified legal counsel for a Supplemental Needs Trust, you might consider contacting one of these organizations for assistance:

For guidance on preparing a financial power of attorney and patient advocate designation for your semi-adult child, you should consult your estate planning attorney or contact your local bar association for a referral. Although there are many online forms you may purchase to do it yourself, I advise against it if you can afford the attorney fees. Although there is no guarantee that a POA will be sufficient to achieve its purposes or be accepted by the receiving party, you will have greater success with one drafted by an attorney experienced with the state laws that may govern its use.

About the Author

Timothy Barrett, Trust Counsel

Senior Vice President, Argent Trust Company

Timothy Barrett is a senior vice president and trust counsel with Argent Trust Company. Timothy is a graduate of the Louis D. Brandeis School of Law, 2016 Bingham Fellow, a board member of the Metro Louisville Estate Planning Council, and is a member of the Louisville, Kentucky and Indiana Bar Associations, and the University of Kentucky Estate Planning Institute Program Planning Committee.

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