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Freedom for Retirement™ is the podcast designed to help you move beyond the fear of the complexity of finances so you can be financially free to achieve personal significance. Tune in with Josh Duncan each week to turn fear into fuel that drives you into Freedom & Significance.
Welcome to the Freedom for Retirement Podcast. If you're a high earning professional, business owner, or someone approaching retirement and wondering whether you are truly on track, you are in the right place. This podcast is all about helping you make smart, confident financial decisions without the fear, confusion, or sales pressure that so often comes with money advice. Each episode is designed to break down complex topics like retirement planning, investing, taxes, and cash flow in plain English so you can understand what really matters and avoid the most common and costly financial mistakes. Everything you hear here is educational, fiduciary focused, and grounded in real world planning experience working with clients just like you.
Josh:I'm your host, Josh Duncan, partner at F5 Financial Planning. Let's get started.
Josh:Imagine this scenario. You get a call at two in the morning. Your 19 year old was in a car accident. They've been rushed to the emergency room, and they're unconscious. You race to the hospital.
Josh:You find the attending physician, and you say, I'm their parent. What's happening? What do you need from me? How can I help? And the doctor looks at you and says, I'm sorry.
Josh:I can't share any information with you. Not because they don't care, not because they're being difficult, but because legally your child is an adult. And you are, in the eyes of the law, a stranger. I know that sounds shocking, but this happens to families every single day across the country. And the worst part, it is completely preventable with three simple legal documents that take less than an hour to put in place.
Josh:I'm Josh Duncan, partner at F5 Financial Planning, where we take a fiduciary approach to maximizing our clients' wealth. Part of what we do every single day is help families think through the things they don't know and implement solutions. Today, we're talking about one of those things, the legal gap that opens up the moment your child turns 18. We're gonna cover what it is, why it matters, and exactly what three documents you need to close the gap before something goes wrong. Since we are discussing legal topics today, you need to know that I'm not a licensed attorney and simply offering education in this video.
Josh:Let's get into it. So here's what most parents don't realize, and I mean most. The moment your child turns 18, they become a legal adult. And that triggers two federal laws that completely change your relationship with them, at least in the eyes of institutions. The first is called HIPAA, the Health Insurance Portability and Accountability Act.
Josh:Most people know HIPAA vaguely. It's the reason your doctor makes you sign a bunch of forms. But what it really means for parents is this. Once your child's 18, medical providers are legally prohibited from sharing health information with anyone, including you, without your child's explicit written consent. The second law is called FERPA, the Family Educational Rights and Privacy Act.
Josh:This one applies to colleges and universities. Once your child enrolls as an adult student, the school cannot share academic records, grades, financial aid information, or even confirm whether your child is enrolled with you unless your child is authorized in writing. Think about that for a second. You might be paying tens of thousands of dollars a year for your child's college education, and the school has no legal obligation to tell you anything about their academic standing. Now, here's where this gets really serious.
Josh:There are two situations where this gap tends to bite families the hardest. The first is a medical emergency, an accident, a mental health crisis, an unexpected surgery. Your child is incapacitated. They can't speak for themselves. You're standing there ready to make decisions, ready to advocate for them, and you legally cannot unless the right documents are in place.
Josh:The second situation is a financial disruption. Maybe your child's studying abroad and becomes incapacitated. Maybe they're in the military and deployed. Maybe there's fraud on one of their accounts and they need someone to step in and manage things on their behalf. Without the right legal authorization, you cannot touch those accounts.
Josh:You cannot make those calls. You are legally frozen out. Here's the phrase I want you to hold on to for this entire video. There's a gap between emotional reality and legal reality. Emotionally, that is still your kid.
Josh:You still know them better than anyone. You would still do anything for them. You're still the person they call when something goes wrong. Legally, you're a stranger. And that gap, that space between how you feel and what the law says can have real, serious, sometimes devastating consequences if you don't close it before something happens.
Josh:The good news is that closing the gap is straightforward. There are three documents you need to discuss with your attorney. Let's talk about each one. The first document is called a healthcare power of attorney. You may also hear it called a healthcare proxy, depending on what state you're in.
Josh:Different names, same basic function. Here's what it does. A healthcare power of attorney is a legal document in which your child names a specific person, let's say you, their parent, to make medical decisions on their behalf if they are unable to make those decisions themselves. Key phrase there, if they are unable. This document doesn't take away any of your child's rights or autonomy.
Josh:As long as they're conscious and competent, they make their own medical decisions. This only kicks in if they are incapacitated, if they are unconscious, if they are sedated, if they are mentally or physically unable to communicate their wishes. I want to make a really important distinction here because this is where people get confused. A health care power of attorney is not the same as a living will. A living will, sometimes called an advanced directive, is a document where your child writes down their specific wishes about medical treatment.
Josh:Things like, if I'm in a permanent vegetative state, I do or do not want life support. It's about what they want. A healthcare power of attorney is about who decides. Who has the legal authority to make those decisions in the moment when a doctor needs an answer and your child cannot speak for themselves. Both are valuable and often combined in the same document.
Josh:But for the scenario I'm I described at the beginning of this video, the emergency room, the unconscious 19 year old, What you need in that moment is a health care power of attorney. You need legal authority to act. And here's a critical detail. This document must be signed by your child while they are competent and willing. You cannot get this done after the fact.
Josh:Once they are incapacitated, it is too late. The whole point is to establish authorization before something happens, not after. For most families, this means having a conversation with your child before they leave for college. I know that conversation might feel a little awkward. Hey, we need to talk about what happens if you're unconscious.
Josh:But it's one of the most important conversations you'll ever have. And framed the right way, most young adults actually appreciate it. They don't wanna be in a situation where no one can help them either. The second document is a HIPAA authorization form. And this one often gets overlooked because it doesn't feel as official as the others, but it fills a specific and important gap.
Josh:Here's the distinction. The healthcare power of attorney gives you decision making authority when your child is incapacitated. But what about situations where your child is perfectly conscious? They're just in the hospital, they've had a procedure, they're being treated for something, and you just wanna be kept informed. You want the doctor to be able to call you, update you, loop you in.
Josh:Without a HIPAA authorization, they still can't share that information with you, even if your child doesn't object. Even if your child wouldn't want you to know, the provider's hands are tied by law. A HIPAA authorization is a simpler document. It's not technically a legal document in the same way a power of attorney is. It's more of a written consent form.
Josh:But it tells health care providers, these specific people are authorized to receive my health information. What it does not do is give you any decision making power. It doesn't let you override your child's choices. It's purely about information sharing. But that is hugely valuable in so many situations.
Josh:Think about a scenario where your child is going through a difficult time, maybe a mental health struggle, maybe a serious diagnosis, and they're dealing with the medical side of things themselves, but they want you to be in the loop. With a HIPAA authorization in place, their provider can talk with you freely. Without it, they cannot. This one is quick, it's simple, and it's often as easy as asking your child's primary care doctor for the form. Some estate planning attorneys will include it as part of the package we'll talk about in a moment.
Josh:In a way, make sure it gets done. The third document is one that most people associate with estate planning for older adults, but it's just as critical for young adults starting their independent lives. It's called a durable financial power of attorney. Here's what it does. A financial power of attorney is a legal document in which your child authorizes a named person, again, likely you, to manage their financial affairs on their behalf.
Josh:We're talking about things like managing bank accounts, signing legal documents, handling transactions, dealing with creditors, managing investments. Now, the word durable is doing a lot of heavy lifting in that title. Let me explain why it matters. A standard power of attorney is actually invalidated if the person who grants it it becomes incapacitated. Which, if you think about it, is kind of backwards.
Josh:That's exactly when you need it most. A durable power of attorney includes specific language that says it remains in effect, or in some cases only takes effect if the person becomes incapacitated. That's the version you want. So when do you actually need this for a young adult? A few common scenarios.
Josh:Your child is studying abroad for a semester. They get injured or sick overseas and cannot manage their finances from there. Maybe they need bills paid. Maybe there's a lease to handle. Maybe there's a financial aid issue.
Josh:Without a durable power of attorney, you have no legal authority to act on their behalf. You can't touch their accounts. You can't sign anything for them. Another scenario, your child joins the military and gets deployed. Deployments can be lengthy.
Josh:Communication can be limited. If something comes up, a car payment, tax filing, a bank issue, having a parent with durable power of attorney means things can keep moving smoothly, even from halfway around the world. And of course, the same incapacity scenario we've been discussing. If your child is in an accident or medical crisis and cannot manage their affairs, this document gives you the legal authority to step in financially, not just medically. One important note, a durable financial power of attorney does not mean you can do whatever you want with your child's finances.
Josh:You are acting as their agent, meaning you are legally obligated to act in their best interest. This isn't a blank check. It's legal authorization to help when it is needed. So who is this for? The short answer is every family with a child who's approaching 18 or who has already passed it.
Josh:This is not just for wealthy families. This is not just for families with complicated estates or health histories. These three documents cost very little compared to the problems they prevent, and the situations they protect against. Medical emergencies, financial disruptions, incapacity can happen to any family at any income level in any state. That said, there are some families where this is especially urgent.
Josh:College students, particularly those going away from home, kids studying abroad, young adults serving in the military, and young adults with existing health conditions, where medical decisions might come into play sooner than expected. If your child fits any of those categories, I would put this near the top of your financial planning to do list. Not after they leave, before. Now, let's talk about how to actually get it done because this is where a lot of families stall out. They know they should do something, but they're not sure where to start.
Josh:The gold standard is to work with an estate planning attorney. And I want to address the pushback that I hear on that immediately. Isn't that expensive? For a young adult who doesn't have a complex estate, this is actually one of the more affordable estate planning engagements you'll find. We're not talking about trusts and wills and business succession planning.
Josh:We're talking about three documents, a healthcare power of attorney, a HIPAA authorization, and a durable financial power of attorney. Many attorneys will bundle these for a few $100 or less. For the peace of mind it buys, that is an exceptional value. Some states also allow simpler online forms that are legally valid. These are a step below what an attorney would produce, but they are better than nothing, particularly if time is short and your child is about to leave for school.
Josh:Just make sure you're using a form that is valid in your child's state of residence, not just yours. There are also a few practical things to keep in mind as you go through this process. First, your child must be willing to sign. This cannot be done without their active participation. They have to consent to granting this authority.
Josh:So have the conversation. Explain the situation, explain the documents, explain what they do and what they don't do. Most young adults, when they understand that this is about protection and not control, are fully on board. Second, these documents should be revisited at key life milestones. When your child gets married, their spouse often becomes the more appropriate person to have these authorizations, not a parent.
Josh:When they have children of their own, when they move to a different state, the laws vary by state, and a document that's valid in Florida may not be honored without question in California or New York. Third, don't just sign the documents and file them away. Make sure the people named in them know where to find them. Consider giving copies to your child's primary care doctor, their university's health center, their bank. A document that exists but can't be located in an emergency isn't much help.
Josh:And finally, I'd encourage you to think about this not as legal housekeeping, but as a natural extension of the financial and family planning work you're already doing. At our farm, we help families think holistically about their financial lives. And that includes the legal and structural elements that protect the family unit as a whole. This is exactly that kind of planning. It's not about creating wealth.
Josh:It's about resilience. It's about being prepared so that if something does go wrong, your family has the tools to handle it. Alright. Let's bring it all together. Today, we talked about the legal gap that opens up the moment your child turns 18.
Josh:The moment that HIPAA kicks in, the moment FERPA kicks in, the moment the law sees your child as an adult and sees you as a stranger. And we talked about the three documents that can close that gap. Number one, a healthcare power of attorney. This gives a named person, usually a parent, the legal authority to make medical decisions on your child's behalf if they are incapacitated. Number two, a HIPAA authorization.
Josh:This is simpler. It just allows health care providers to share health information with you. It doesn't give you decision making power, but it keeps you informed. Number three, a durable financial power of attorney. This gives you the legal authority to manage your child's financial affairs on their behalf, whether they're abroad, deployed, or unable to act for themselves.
Josh:These three documents take a short amount of time and a modest amount of money to put in place. But the protection they provide, the peace of mind they provide, is enormous. Don't wait until your child is already at school. Don't wait until something happens. Have the conversation now, get the documents in place, and let everyone head into this next chapter with clarity and confidence.
Josh:Freedom for personal significance, please visit our website @www.f5fp.com. Thanks for listening, and I'll see you in the next episode.