Health insurance. Is your child insured? If not, it makes sense to step in. Insuring her protects you, because you’re not likely to let her go untreated if she’s seriously ill.
Typically, dependent children can stay on your policy until 18 or 19, or 23 if they’re in school full time. But states are pushing insurers to cover them longer than that. In Massachusetts and Colorado, policies have to cover dependent children until 25, whether they’re in school or not. In Utah, it’s 26. New Jersey just pushed the age to 30. (These new rules apply only to insurance companies, not the plans of corporations that self-insure, although corporations might broaden benefits, too.) An alternate choice: get a high-deductible policy for catastrophic care. Planner Matt Yerkes of Cincinnati says his daughter, at 27, pays just $100 a month.
Medical care. Did you know that you lose control over your child’s medical decisions when he reaches 18? He’s entirely in charge. If he can’t choose (say, he’s in a coma), the doctors will stabilize him. After that, it all depends. State “fallback” laws may let parents decide in a crisis, says attorney Catherine Hood Kennedy of Nelson Mullins Riley & Scarborough in Columbia, S.C. But what if the parents are separated and disagree?
To clear the path, your 18-year-old should put two decisions in writing. First, how he wants to be treated if he’s in a permanent vegetative state or terminally ill (that document is called a living will). And second, who should make health-care decisions if he’s unable to speak for himself (that’s a durable health-care power of attorney, or “proxy”). Naming an agent is especially important. It puts someone the child trusts in control of every health situation, not just questions affecting end-of-life, says planner Scott Emblen of Hewins Financial in Foster City, Calif. The proxy should also give the agent access to his medical records if he’s incapacitated. “Without it, parents are finding it harder, if not impossible, to obtain private health information about their son or daughter,” says attorney Terrie Varnet of Spain, Spain & Varnet in Chicago.
Ideally, these documents will be drawn up by a lawyer. If you pluck forms from the Web, they should be specific to your state. Follow all the instructions, especially about witnesses. That saves the directive from being rejected in a dispute. Simple handwritten statements may be rejected, too.
Auto insurance. Is your child still on your family policy? That’s the cheapest way to get coverage. Your premiums should drop if he’s away at school and drives your car only during vacations. They’ll rise again if he moves back home (but be sure to tell your insurance agent that he’s there–you don’t want any postcrash arguments). If he has his own car, planners advise that he buy his insurance separately, even if you have to give him the money. It costs more that way. But it might save you from being roped in to a huge liability judgment if he causes a tragic accident, says planner Craig Evans Carnick in Colorado Springs, Colo. Agent Robbie Moore of Blanchard & Calhoun Insurance in Augusta, Ga., warns that parents might still be liable, if the child lives at home or is a student. It depends on the lawsuit. You’re safer if the child’s liability protection is as high as yours.
Life insurance. Did you buy insurance on your child’s life by adding a rider to your personal policy? Check the expiration date. Most riders end when the child reaches 25. But you might still be paying for it years later as part of your regular premium, says planner Rick Sabo of Money Concepts in Gibsonia, Pa. You usually have to call to get the charge removed.
If the child has her own policy, her rates might be based on a smoker’s mortality table (not that babies smoke; they’re just higher-risk). To get lower, nonsmoker rates, she’ll have to ask when she’s 18 or 20.
Cosigning a loan. Are you nuts? Maybe your child is reaching for more credit than he can afford. If he pays late, it affects your credit rating right along with his. Never sign a loan that you couldn’t cover yourself, says Bill Cleveland of Preston & Cleveland Wealth Management in Augusta. Even a reliable child might lose his job. If you do sign (you saint), keep track of the payments by getting a monthly statement from the lender or the child.
No rulebook is going to suit every parent. But knowing the lay of the land should at least help you decide.
