While discussing financial issues with young adults can be challenging, it’s worth every effort to have this important talk at the appropriate time. Here are a few considerations that may help with your conversation.
Reasons why your adult child should designate you as ‘agent’
Keep in mind, it’s not uncommon for a designated agent to have to present the actual document in a transaction to invoke your power. This is generally to ensure that proper authority has been granted for the agent to undertake the action in question since a durable power of attorney can be either narrowly tailored or grant broad authority.
- If your son wants to sell his car that’s been sitting in your garage for months while he’s attending college in another state, your state’s motor vehicles department generally will require that you present the power of attorney before your authority to sign the title will be honored.
- If your daughter wants to buy or sell a piece of real estate and she’s living and teaching overseas, you would be asked to present the power of attorney verifying you are the agent of record acting on her behalf in order for the title company to validate and proceed with the transaction.
Let’s say your daughter is studying abroad. Having a durable power of attorney appointing you as the agent would allow you to handle necessary financial paperwork from here on her behalf or access her bank account in an emergency to pay her bills or renew insurance coverage.
Additionally, if you are a parent of a person with a disability, being able to act as the agent might help with monitoring and assisting with financial choices. However, a person with disabilities must understand the details of the power of attorney document and be competent to sign it.
Bottom line, even though a power of attorney gives parents (as agents) the authority to execute transactions on behalf of the adult child, any and all decisions must be made according to the wishes of the child. You, as the agent, cannot substitute your will for theirs.
Other important legal documents your adult child should consider
After you talk with your child about authorizing you as agent regarding financial matters, you also should discuss other important legal authorizations which often accompany a durable power of attorney for finances:
- Durable power of attorney for health care. With this legal document, the agent is granted the authority to receive medical information and make medical decisions if an adult child becomes incapacitated as a result of an accident or medical emergency.
- HIPAA privacy authorization. A signed HIPAA authorization form authorizes medical care providers to disclose your adult child’s protected health information to the agent. Without it, health care providers are legally prohibited from sharing information, even with family members and even if they are covered under your health insurance.
- Health care directive. Sometimes referred to as a living will, this directive allows your child to specify his or her wishes regarding medical treatments used to prolong life and organ donor preferences in case of an emergency or serious health condition.
These documents may also be available as fillable forms on your state or local bar association website. If you choose to go this route, it might be fitting to use this as a stop-gap measure only and have the documents reviewed and updated by your family’s legal counsel at the earliest possible convenience.
Contact Commerce Trust Company today for more information or if you have questions about these important documents.
The opinions and other information in the commentary are provided as of September 22, 2022. This summary is intended to provide general information only, and may be of value to the reader and audience.
This material is not a recommendation of any particular investment strategy, is not based on any particular financial situation or need, and is not intended to replace the advice of a qualified tax advisor or investment professional. While Commerce may provide information or express opinions from time to time, such information or opinions are subject to change, are not offered as professional tax, insurance, or legal advice, and may not be relied on as such.
Commerce does not provide legal advice to its customers. Consult an attorney for legal advice, including drafting and execution of estate planning documents.
Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.
Commerce Trust Company is a division of Commerce Bank.
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