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(The following is from David Burleigh‘s blog dated July 14, 2014.  David is a local attorney and an expert in the areas of Family Philanthropy and Family Enterprise Strategic Planning.  He represents private business owners and their families in their business, family and personal affairs.  David is a shareholder at Cincinnati law firm Buechner, Haffer, Meyers, Koenig Co. and is a consultant for Withers Consulting Group, an international family enterprise consulting firm.)

As I mentioned last time, my writings concerning governance and succession in family enterprises will appear on the Withers Consulting Group Web site. Occasionally, though, there still will be law-related pieces on this page. Now is one of those times.

The specific occasion is the departure of children for their freshmen year of college. My oldest child leaves for college in less than a month, so I count myself among those who are navigating this transition. We’ve all heard stories about college students who have gotten themselves in a jam that resulted in legal problems.  Here are some considerations for parents to address before their children head out the door.

Financial Power of Attorney. Once a person turns 18, he or she has capacity to make certain legal decisions. As a result, the college setting can become a three-party venue for confusion – among the student who earns grades toward a diploma, the parents who pay college tuition, and college personnel who operate under policies that do not necessarily favor either student or parent. A useful way to remove uncertainty is for the student to make the parent his or her legal agent for financial matters. In the event the student cannot act, the parent has legal authority to act for the student. A good financial power of attorney will cover authority to handle matters such as: tuition payments, academic transcripts, bank accounts, credit cards, apartment leases, loan agreements, and auto insurance.  The power of attorney can be written so the student is still responsible for being an adult.  A power of attorney need not promote the “helicopter parent” phenomenon.

Healthcare Power of Attorney. Being sick in college is no fun. It is isolating, and it can even be dangerous, especially if the school is far from home or the student is studying abroad. I recommend the student make the parent his or her legal agent for healthcare concerns. As with a financial power of attorney, the goal is to give the parent legal authority to act on the student’s behalf if the student is incapacitated or cannot act. The power of attorney should cover issues such as: emergency room treatment, hospitalization, outpatient procedures, and payment of medical bills.

Will and Trust. It’s not too soon for your college student to make a will. Parents may reason that a will, much less a trust, is unnecessary since the child doesn’t own anything. Before taking this view, it’s important to think about what the child does own – as well as what he or she may own in the future.

If your child is the beneficiary of a Uniform Transfer to Minors Account, a will and a trust are good ideas. Whether your child, already age 18, is the legal owner of the account depends on state law. Some states do not vest the ownership in the child until he or she turns 21. But each investment custodian follows its own rules, and many treat the child as the owner as soon as the child turns 18. For example, if your bachelor brother put $50,000 in a minor’s account for your daughter when she was nine years old, to be used for her education, the investment custodian may have started treating it as your daughter’s property when she turned 18. Unlike a 529 plan, there are no restrictions on how your daughter spends this money. The better practice is to have your daughter transfer the money to a trust, with you or your spouse as trustee. Placing the money in trust will protect it from creditors, accidents, and unscrupulous “friends.” A trust can also be an opportunity for the child to learn more about investing.

All the more, if your child owns an interest in a family enterprise, a will and a trust are smart moves. Some families have the practice of gifting shares of stock in a family business to children. Sometimes children own stakes in LLCs or limited partnerships. In any of these scenarios, if the child individually owns the asset, having the child make a will and place the asset in trust is a good idea. Lastly, if the child individually co-owns the asset with other family members, the family should have a written ownership agreement governing the asset, and the child should sign it. Otherwise the larger family will be exposed to risks the child incurs. And later, if the family decides to sell the asset, financially the family will be better off if all owners are subject to the same agreement.

So when you go out to buy the soap, the sheets and the fan for Joe or Jen College, make sure you think about these legal items too.