Back to School: Eight Estate Planning Insights for a Smooth Transition to College

As summer fades and the back-to-school season approaches, many parents are preparing to send their children off to college. It’s a time filled with excitement, nervous anticipation, and for many, a significant financial commitment. Amid the flurry of packing lists and orientation schedules, it’s also crucial to consider the estate planning aspects that come into play when a child heads off to college.

Here are several key considerations to keep in mind:

1. Check with your child’s educational institution to make sure you stay in the loop.

Schools that receive funding through the U.S Department of Education are bound by The Family Educational Rights and Privacy Act (FERPA), which protects the privacy of student education records. This likely means that you must have written permission to access your child’s education records, including but not limited to their bills - even if you pay them. Before the semester begins, it’s a good idea to sit down with your child, discuss which records you need to see, and ensure that they grant you access.

2. Update Powers of Attorney and Healthcare Directives

When your child turns 18, they are legally considered an adult, even if they’re still living under your roof. This shift means you no longer have automatic access to their medical records or the authority to make decisions on their behalf in the event of an emergency. It’s essential to encourage your child to execute a durable power of attorney and a healthcare proxy or medical power of attorney. These documents allow you to act on their behalf if they’re incapacitated and need immediate decisions regarding their medical care. You can learn more on this topic in my previous blog .

3. Review and Update Beneficiary Designations

If your child has any financial accounts, insurance policies, or other assets with designated beneficiaries, it’s a good time to review and update these designations. Some student bank accounts require parental permission for transfers and other transactions, so review the rules to ensure that your child can access funds even if they are away from you.

4. Establish an Education Trust

For some families, setting up an Education Trust for educational expenses can be a smart move. A trust can provide financial support for your child’s, grandchild’s or other beneficiaries’ education and other expenses while potentially offering tax benefits and asset protection. Discussing this option with an estate planning attorney can help you determine if an education trust is appropriate for your family’s situation and the structure that would best meet your needs.

5. Consider a College Savings Account

Contributing to a 529 college savings plan or another education-focused account can be worth consideration. These accounts offer tax advantages and can be used to pay for qualified educational expenses. They also can be part of a larger estate plan to ensure that educational costs are covered and that other estate planning goals are met.

6. Communicate Your Plans

Open communication with your child about your estate planning decisions is essential. While they might not be involved in the day-to-day details, understanding your intentions and the importance of these legal documents can help them be prepared for any eventuality. It also ensures they are aware of their responsibilities and the resources available to them.

7. Prepare for Potential Financial Aid Impact

If your child is applying for financial aid, be aware that changes in your financial situation or asset allocation could impact their eligibility. Estate planning decisions, such as transferring assets into a trust or changing beneficiary designations, might affect financial aid calculations. It’s wise to consult with a financial advisor who can provide insight into how these decisions could influence financial aid assessments.

8. Review Your Own Estate Plan

Sending your child to college is a major life transition. Whether this is your first child or your last to leave the nest, the future may feel daunting. Taking the time to review all that you have in place for your own estate plan, can help with peace of mind. Ensure that your will, trusts, and other estate planning documents reflect your current wishes and circumstances. Consider any new assets or changes in your family dynamics that might affect your plan.

Conclusion

As you prepare to send your child off to college, taking the time to address these estate planning considerations can provide peace of mind and help ensure a smoother transition. By updating legal documents, reviewing financial plans, and communicating with your child, you can focus on celebrating this exciting milestone without the added stress of unresolved legal and financial issues.

If you have questions or need assistance with your estate planning needs, don’t hesitate to reach out .