As the school year kicks off, life can become hectic for New York parents. Between juggling school schedules, extracurricular activities, and daily responsibilities, it’s easy to overlook important tasks. However, it’s crucial to prioritize both financial and legal planning to secure your child’s future. This includes preparing for higher education costs and ensuring your adult college-bound child has the right legal documents in place. These steps not only help manage tuition expenses but also safeguard your child in unexpected situations. For more comprehensive guidance for New York parents, request a free copy of our guide, Complete Guide to Legal Planning for New York Parents.
Financing Your Child’s College Education
Saving for college can feel overwhelming, especially with the rising costs of tuition and living in New York City. But starting an education savings account early, saving consistently, and understanding your options can make a significant difference. Learn more about how to address financial and money matters with your kids in our article: How to Talk to Your Kids About Money.
Below is a list of some of the most common account types to use to save for college expenses.
529 Savings Plans
These tax-advantaged accounts are specifically designed for education expenses. Earnings grow tax-free, and withdrawals are tax-free when used for qualified expenses like tuition, fees, and books. New York’s 529 College Savings Program offers NY taxpayers a state tax deduction for contributions to a 529 plan; however, families can contribute to any 529 savings plan and do not have to be a resident of a state to participate in that state’s plan.
Coverdell Education Savings Accounts (ESA)
Similar to 529 plans, Coverdell ESAs allow for tax-free growth and withdrawals for education expenses. However, annual contributions are limited to $2,000 per beneficiary, and there are income limits for contributors.
Savings Bonds
U.S. Savings Bonds are a low-risk way to save for college. They can be purchased online, and the interest earned is tax-free if used for qualified education expenses, subject to certain income limits.
Taxable Investment Accounts
These accounts offer flexibility with no contribution limits or penalties for non-educational use. However, they do not provide tax benefits for education savings.
Custodial Accounts (UGMA/UTMA)
These accounts are set up for minors and managed by an adult custodian until the child reaches adulthood. While the funds can be used for education, they are considered the child’s asset, which can impact financial aid eligibility.
Legal Documents Important for College Students
Planning for college expenses is just one part of preparing your child for higher education. It’s equally important to ensure they have the necessary legal protections as they transition into adulthood. Once your child turns 18, they are legally considered adults, which means parents lose automatic access to their medical, financial, and academic records. becomes even more critical if your child studies abroad. These legal document are even more important if you student plans to attend a university outside of New York state to ensure you can manage their health, financial, and academic matters and make decisions on their behalf if they encounter issues while away from home. Read more in our article, Going on Vacation this Spring Break? Have These Legal Documents in Place First
Here are essential legal documents that can help you support your college student during emergencies:
HIPAA Waiver
This document allows healthcare providers to share your child’s medical information with you. Without it, you won’t be able to access their medical records or be informed about their health in emergencies. A New York State HIPAA Waiver is available online or from your child’s healthcare provider.
Medical Power of Attorney (POA)
A medical power of attorney designates someone (usually a parent) to make medical decisions on behalf of your child if they are unable to do so. This is crucial in situations where your child is incapacitated and can’t make decisions themselves. An New York City estate planning lawyer at The Village Law Firm can create a medical POA for your child.
Durable Power of Attorney (POA)
This document grants you the authority to manage your child’s financial matters, such as paying bills or handling bank accounts, if they are unable to do so. It’s particularly useful if your child is studying abroad or unable to manage their finances. Be sure to obtain a durable POA from an estate attorney to ensure it meets New York state legal standards.
FERPA Waiver
The Family Educational Rights and Privacy Act (FERPA) protects the privacy of student education records. A FERPA waiver allows your child to grant you access to their academic records. This can be important if you need to stay informed about their academic progress or assist in managing their education. FERPA waivers are available through your child’s college or university.
Why Legal Documents Are Necessary for College Students
Without these legal documents, parents can face significant challenges in supporting their children during emergencies. For example, without a HIPAA waiver or medical power of attorney, you could be left in the dark about your child’s medical condition in a crisis. Similarly, without a durable power of attorney, managing your child’s financial affairs, especially if they are incapacitated, can become complicated and stressful.
To ensure these documents are in place and meet the legal requirements of your state (and the state where your child will attend college), consult with an attorney. This is especially important if your child will be studying out of state or abroad, as different states may have varying laws and requirements.
Secure and Plan for Your Child’s Future Today
Whether you are preparing to send your child off to college or just beginning to explore higher education savings options, it’s essential to work with a financial or legal professional to ensure you make the best choice in a savings plan and obtain legally compliant documents. By starting early with a college savings plan and setting up the necessary legal documents, you can provide a solid foundation for your child’s future and ensure you can help them in an emergency once away at college.
For assistance with creating the necessary legal documents for your adult child or to discuss your family’s estate planning needs, schedule a call with our New York City office today. Our experienced attorneys are here to guide you through these important decisions and ensure your child’s future is protected and set up for success.
