When Your Child Turns 18

Turning 18 is a chance for families to shift from making decisions for their children to helping these young adults make informed decisions for themselves.

In many states, when your child turns 18, your legal authority changes overnight.

While many parents focus on milestones such as high school graduation, college or a first job, age 18 also marks the point when many parental rights and responsibilities begin to change. Parents may no longer be able to automatically make medical decisions, access educational records or manage financial matters on their child’s behalf. At the same time, young adults may begin assuming ownership of assets, signing legal agreements and making decisions that carry long-term consequences.

Taking the time to address these legal and financial considerations can help families prepare for their young adult’s growing independence.

Plan for Medical Emergencies Before They Happen

Many parents are surprised to learn that once a child reaches adulthood – or even sooner in some states – access to healthcare information and decision-making authority becomes more limited than they are used to. Upon a child reaching age of maturity, healthcare providers generally cannot share medical information or involve parents in medical decisions without the patient’s permission.

Two documents can help address this situation:

• A healthcare proxy or medical power of attorney allows your child to designate someone to make medical decisions if they become unable to communicate.
• A HIPAA authorization allows designated individuals to access medical information and communicate with healthcare providers.

Families might also discuss advance directives or living wills, which allow young adults to document certain healthcare wishes in advance. While no parent wants to imagine needing these documents, having them prepared before an emergency occurs can provide clarity when it matters most.

Put Decision-Making Authority in Place

Medical decision-making is only one piece of the puzzle. As young adults begin opening bank accounts, signing leases, taking out student loans and managing other financial obligations, families should also consider what would happen if the child were unable to handle those responsibilities themselves.

A durable financial power of attorney (DPOA) allows a trusted individual to act on your child’s behalf in specified financial matters. Depending on how it is drafted, this authority may allow that individual to pay bills, manage accounts or sign documents if your child is unavailable or unable to act on their own behalf.

Even in situations that do not involve a medical emergency, a DPOA can be helpful. For example, a student studying abroad or traveling for an extended period may appreciate having someone they trust assist with certain financial responsibilities back home. It can also offer flexibility and continuity when circumstances make it difficult to handle those matters personally.

Understand How Asset Ownership May Change

Turning 18 can also mark an important shift in how certain assets are owned and controlled.

Many families establish custodial accounts under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) to save and invest on behalf of a child. Control of those assets may transfer to the child as early as age 18, depending on state law and the terms of the account. This transfer might represent the first time a young adult gains direct control over a meaningful amount of money, creating new opportunities as well as new responsibilities.

This can also be an appropriate time to introduce children to broader family wealth planning discussions. If trusts have been established for future generations, helping beneficiaries understand how they work and the responsibilities that come with them can build confidence over time. Families often find that preparing heirs for stewardship is just as important as transferring assets themselves.

Begin Building the Foundation of an Estate Plan

Estate planning is not just for retirees and business owners. Even young adults with relatively modest assets may benefit from having certain foundational documents in place.

In some cases, a simple will may help clarify wishes and simplify the administration of an estate. This may be particularly relevant if the individual owns property, has accumulated significant assets or is involved in more complex family or trust arrangements. Families might also wish to review beneficiary designations and discuss how digital assets and online accounts would be managed if something unexpected occurred.

Turning 18 can also serve as an introduction to the broader concepts behind estate planning, which can be especially valuable if a child is expected to receive larger gifts or inheritances in the future. It creates an opportunity to discuss family values, charitable goals, financial responsibility and the role wealth may play in a child’s future. These conversations do not need to happen all at once, but beginning them early may help prepare the next generation for the responsibilities that often accompany financial success.

The Larger Opportunity

Turning 18 is a chance for families to shift from making decisions for their children to helping these young adults make informed decisions for themselves. The documents discussed here can help address practical legal concerns and open the door to conversations about responsibility, independence and the family’s long-term goals.

Baird Trust Company (“Baird Trust”), a Kentucky state- chartered trust company, is owned by Baird Financial Corporation (“BFC”). It is affiliated with Robert W. Baird & Co. Incorporated (“Baird”), (an SEC-registered broker dealer and investment advisor), and other operating businesses owned by BFC. Past performance is not a predictor of future success. All investing involves the risk of loss and any security may decline in value. This is not intended as a recommendation to buy any security and views expressed may change without notice. Baird Trust does not provide tax or legal advice. This market commentary is not meant to be advice for all investors. Please consult with your Baird Financial Advisor about your own specific financial situation.