Doctor, what do you mean you can't talk to me about my child?

Important considerations for parents of young adults


By Steve Davis, CERTIFIED FINANCIAL PLANNER ™



MANSFIELD, MA:  It was a proud moment for the members of Mansfield’s largest ever graduating class. Each of them walked across the stage of the Comcast Center to receive their diplomas -- and thunderous applause from family and friends. My wife and I were there cheering one of our boys and the conversation we shared with other parents was about times past. “Remember when came here direct from the Little League fields so we could watch the kids perform in the Jordan Jackson band? They were so tiny then.” But here we were a dozen years later watching our “kids” walk off the stage into adulthood. Where did the time go?

For parents of young adults, it may come as a surprise to learn that once our children become legal adults at age 18, they and they alone are responsible for making their own medical and financial decisions. This means that if your son or daughter has an accident or is unable to make decisions about his care, you would be powerless to help – even as parents. While your son may still be your dependent, you are no longer considered his legal guardian. Under the federal HIPAA rules, your teen’s medical records are between him and his doctors. Similarly, no bank officer or college purser will break privacy rules to discuss your child’s financial account status or even grades. And just because you pay the tuition doesn’t override the school’s privacy policy. Your daughter’s finances are as private as yours.

Helping with Health Care Decisions:

It’s every parent’s nightmare. You might be informed that your child had an accident and is in the hospital, but legally, you cannot get any information about your child’s condition or treatment. As a dad, I can’t imagine a situation that would produce stronger feelings of helplessness and frustration.

So, what’s a parent to do? The first step is to have an adult conversation with your adult child. Explain that in the event of a medical emergency you would be unable to help unless you are given prior permission. According to Easton attorney Karen McSherry, “A properly executed health care proxy and durable power of attorney grants a parent authorization to make health care decisions if your child is incapacitated, and grants you access to your child’s medical records so you can have discussions with doctors and insurance companies.” When you speak with your adult child, you should agree in advance how and why such documents would be used. Your son or daughter should also know that they remain in charge of their own affairs since the documents can be revoked at a later date.

Without prior approval, the only other option for parents of an incapacitated adult child is to petition the probate court for guardianship. This is often a long and expensive process that only gives you the ability to help once the court appoints you as guardian.


Helping with Financial Decisions:

Before we know it, the summer will be over and many of these recent high school grads will be heading off to college. Hopefully, we won’t see them on TV at the big game holding a sign that reads, “Hi Dad, send money!” But if your student needs help with banking, financial aid, or has a problem with his credit card while travelling overseas, for example, you’ll be unable to help unless you have a durable power of attorney.

According to McSherry, “Properly drafted documents will give parents peace of mind because they know they’ll be able to help with ordinary transactions, plus deal with financial and medical emergencies.”


Action Steps:

So, while your kids are still living under your roof, take some time to talk with them about these important matters. Before your son or daughter heads off for school and beyond, visit your local attorney to discuss your specific situation. Better safe than sorry.



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This article was written by Steve Davis and appeared in the column "Talking with Davis about Money Matters" found at http://mansfield-ma.patch.com/articles/doctor-what-do-you-mean-you-cant-talk-to-me-about-my-child


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Honey, I lost my 401k (and other big mistakes)

By Steve Davis, CFP®

It has been a long winter in New England, but we’ve just moved the clocks ahead and soon spring will be here. The storms are over, the snow has melted and now it’s time to clean up the yard. I recently found a winter hat that had gone missing after the first snow storm of the year. It was in my backyard for months, but we couldn’t find it because the grass has been covered with a blanket of snow since Christmas. The old adage, “out of sight, out of mind” certainly held true because after a week or so I sort of forgot about that hat and resorted to wearing another one we had in the closet.

Lost Accounts:

It is amazing how many people have misplaced 401k accounts. You might think it inconceivable that someone would “lose” the information about an investment worth thousands of dollars, but it is not all that uncommon. For frequent job changers, trying to keep up with the paperwork on several different orphan 401k accounts can be an administrative nightmare. Losing track sometimes happens after a move when the mail forwarding order expires, or after a name change following marriage or divorce.

At other times, the account information is lost when a former employer declares bankruptcy or when the owner of a small company dies and the company closes its doors. Trustees have a fiduciary liability to distribute the plan’s assets, but sometimes this doesn’t occur, especially when the trustee is a former employee who is no longer being paid. The good news is that retirement funds invested in 401k plans belong to the employee, not the employer, so even when a company files bankruptcy or ceases operations, plan participants are protected. Because assets continue to be invested, amounts that can be reclaimed are sometimes substantial. If you think you or a family member may have money in an abandoned plan, search the Department of Labor’s database. http://www.askebsa.dol.gov/AbandonedPlanSearch/

Beneficiary Blunders:

The 401k Beneficiary Form kept in the Human Resource Department of your old company is often more important than the will or trust that was carefully crafted by your attorney. That’s because a will or trust has virtually no effect on how your retirement account assets are distributed to your heirs. Instead, 401k (and IRA) accounts are transferred according to the provisions listed on your beneficiary form. And all too often these forms are hastily filled out during company enrollment meetings and are never given a second thought. Here are four of the biggest Beneficiary blunders:

Mistake #1: You, your heirs or your old employer can’t find the form. In a recent ruling, the US Supreme Court made it clear that without a proper beneficiary form you are stuck with the default provisions of your company’s plan. Don’t take it on faith that the form you filled out a dozen years ago is still filed correctly at your old company. If the form is lost, it doesn’t matter if your will, divorce decree or other legal documents provide different instructions. When the default provisions say your account should be paid to your estate, that’s what will happen even if this action results in thousands of dollars in extra taxes or probate costs.

Mistake #2: The form is filled out incorrectly or is out-0f-date. Sometimes what seems like a simple oversight can accidently disinherit those you want to favor. A million dollar mistake occurred in 2001 after Anne Friedman died of a heart attack and her entire pension of almost $1 million went to her estranged sister rather than her loving husband of twenty years. This travesty happened because the beneficiary form on file was completed years before Ann and her husband met in 1978. The form had been forgotten by all except the sister who refused to give up her new found wealth. Similar tragedies can occur when adult children die before their parents. In cases like this, 401k proceeds usually skip the family of the deceased beneficiary and are instead shared only by the surviving children.

Mistake #3: Listing a minor as beneficiary. When a minor child inherits a 401k directly, a court-appointed legal guardian must be named to administer the funds on the child’s behalf. If this happens, your family will get tied up in the court system with all the cost and aggravation that involves – and with outsiders making decisions that impact your family’s welfare.

Mistake #4: Not naming a contingent beneficiary. If your primary beneficiary isn’t around to collect your 401k, and you haven’t named a secondary beneficiary, the Probate Court will likely liquidate your account in a lump sum and force the immediate payment of substantial federal and state taxes. This simple oversight robs your children and grandchildren of the opportunity to stretch your distributions –and the tax bite—over their lifetimes. Stretching the distributions like this allows the investments to continue to grow tax deferred and may result in substantially greater inheritances.

A Spring Cleaning Reminder:

Don’t make the same mistake I made when my hat was forgotten once out of sight. Instead, when you grab your rake and begin to clean your yard this spring, remember that you may have some old 401k plans that need tidying up too. If you have old 401k accounts, consider rolling that money over to your own consolidated IRA.

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This article was written by Steve Davis and appeared in the column "Talking with Davis about Money Matters" found at http://mansfield-ma.patch.com/articles/honey-i-lost-my-401k-and-other-big-mistakes-2