Family · February 18, 2021

Why You Need Financial Power of Attorney for Your Young-Adult Kids

Turning 18 is a huge milestone in your child's life. In the eyes of the law, at least, they're full-fledged adults capable of voting, entering into legal contracts and even getting married.


But there's another important legal change that happens when your child turns 18—you no longer have automatic access to their financial accounts and healthcare records.

While it's important that your child learns to take responsibility for those things on their own, there also may be emergencies or other situations where you might need access as well. For instance, if your child goes off to college and has to visit an emergency room, the hospital might not know to contact you. That's where financial power of attorney can help.

How power of attorney works

Power of attorney, or POA, is a legal document that allows one person, the agent, to make binding legal and financial decisions on behalf of someone else, the principal or grantor. In this case, you'd be the agent and your child would be the principal.

As POA, you'd be able to access and make decisions about your child's bank accounts and investments, pay taxes or other bills on their behalf, and manage any government benefits that they receive.

If your child studies abroad for a semester, for example, financial power of attorney would give you the ability to pay their cell phone bills or renew their insurance on their behalf. In the case of a medical emergency, you'd be able to access their bank account to pay bills if they're unable to do so.

Parents of a child with a disability might also want a POA to continue to monitor and assist their financial choices. It's important to note here that a person with special needs must be competent to sign and understand the power of attorney document for it to be valid.

What to know

Once your child has agreed to grant you POA, you'll work with a lawyer to create the document. You'll need to choose the type that works best for your situation:

  • General POA: Takes effect immediately and ends if the principal is incapacitated
  • Durable POA: Goes into effect immediately and remains in place upon incapacitation
  • Springing POA: Only takes effect in the case of incapacitation

You and your child can discuss which type makes the most sense for you. If your child is healthy and prefers to manage their own affairs, for example, you might choose springing POA as a precaution in cases of emergency. If your child is going out of the country and concerned about managing their financial affairs from abroad, you might go with durable POA. That would allow you to assist with financial affairs now as well as in an emergency. You can also limit the scope to cover only specific types of transactions or a specific period of time.

POA typically gives you access to financial, educational and medical records, but it doesn't allow you to make medical decisions. For that, you'd need a healthcare proxy, a similar document that covers health-related decisions.

Although POA allows you to execute transactions on behalf of your child, all decisions must be made according to their wishes as long as they have the mental capacity to make them. If you and your child disagree about a decision, their choice is final, from a legal perspective.

Having a child become a legal adult can mean big changes for both of you, but you may still want to provide any support that you can as their parent. Having the appropriate power of attorney in place can better protect your child in case of an emergency and put both your minds at ease.

This material is for informational purposes only and is not intended to be an offer, specific investment strategy, recommendation or solicitation to purchase or sell any security or insurance product, and should not be construed as legal, tax or accounting advice. Please consult with your legal or tax advisor regarding the particular facts and circumstances of your situation prior to making any financial decision. While we believe that the information presented is from reliable sources, we do not represent, warrant or guarantee that it is accurate or complete.

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