Welcome everyone to another edition of Aging Insight. I'm Lisa Shoalmire and I'm here with John Ross. John and I are elder law attorneys here in our community. Aging Insight is a program for you to get lots of information about everything from retirement to staying aging in place and staying at home, to even paying for college for grandchildren. That's a new one, isn't it John? [chuckle]
We know there's just lots of little tidbits of information that we feel are important to y'all. If you wanna make the most of your assets and benefit your families. Elder law is this strange intersection between health and housing and finance and legal. When you start talking about finance, often times, we will see that the older generation, particularly in the retirees, their expenses have gone down quite a bit. There's no minor kids in the home anymore. The houses...
Yeah, amazing. I wouldn't know about that. But you get your debt paid down, no more mortgage, things like that. All of a sudden that gives you some disposable assets and in the mean time, often right around that retirement age and a few years into it, grandchildren start aging up into that college time-frame. They're coming up graduating from high school and starting to look at college and things like that. So although you wouldn't necessarily think of college planning as being a elder law issue, the intersection between those grandparents and those grandkids is a big one. A lot of times there is a lot of information that either you as the grandparent can benefit from, or that you can help pass down to those kids who are frankly busy with their jobs and don't have the time to sit back and learn by watching a program like this.
Right. Today we're gonna talk about issues for college-bound grandchildren. Or if you're not a retiree yet and you're still trying to raise those kids then this certainly applies to you. As you think about any child or young adult in your life that is going to be pursuing college education.
So families more than ever have taken the attitude that a college education is a necessary tool for a child to become an independent adult and have a good solid career, and get paid enough to live securely. So a college education is a big deal for lots of families. A lot of times multi-generations are involved in making this happen. So parents and grandparents play a big role in young adults getting that college education. Gone are the days when a young adult can work as a cashier at the drug store and still manage to pay for their tuition and fees and books. College cost have accelerated far greater than the inflation rate. So low paying, low skilled jobs are just not paying enough for someone to be able to pay college tuition and do all of that. So that's where parents and grandparents play a big role.
Of course there's some other things that a lot of times people don't think about like for the fact that when that child, most likely that senior year or maybe the summer following that senior year, the child has turned 18.
It is. They may still seem like the child. Just because yesterday they were 17 and today they're 17 didn't automatically bestow on them things like I don't know, common sense.
Right. So even that newly minted 18-year-old, you as a parent or grandparent are probably still thinking about them as a child but the law looks at them as an adult.
That's exactly right. I've often had folks ask me, "Well John, I know y'all are elder law attorneys. How old do I need to be to benefit from using an elder law attorney?" And then my response is always, "You need to be 18." Of course, that typically gets a laugh, and I am joking somewhat when I say that but not really. Here's why. It's because, for example, I tell everybody that I ever talk to that there are four things that everybody walking around over the age of 18 should have in place. And we've talked about these on the show before. A financial power of attorney, a medical power of attorney, a HIPAA release and a living will. Basically these four documents are designed so that if somebody becomes incapacitated that somebody else can help handle their business with that financial power of attorney, make medical decisions with that medical power of attorney, access medical records with that HIPAA release and have some indication of end of life decisions on that living will, also known as a directive to physicians. But people don't think about this from an 18-year-old standpoint, often until they've been slapped in the face with it. The classic example is the child who has gone off to college and they're in Fayetteville, they're in College Station, they're in Austin, whatever and let's say they get into a car wreck.
That's right. And they are over age 18, so they are an adult. So when that car wreck victim is taken to the ER, and you as a parent here back in the Texarkana area, get that phone call from a roommate or a friend of your child and they're telling you what hospital the child's been taken to. You as the parent, you're frantic. But you pick up the phone and you call the ER at the hospital and you tell them, "I am so and so's mother and I've been told she's been in a wreck and they're bringing her into the ER" or "She's at the ER. What's her status, what's her condition?" And John, what is that person answering the phone at the ER, what are they gonna tell that frantic parent on the phone.
Yeah, they may very well say "Well, I'm sorry. We don't have anything on file that says that this person wants you to know about their medical information." All of that medical information is private to an adult. If an adult wants somebody else to be able to discuss their medical situation, it's up to that person to give permission out there.
Right and so if your child is in a state where they cannot give permission because of their medical condition and the law is so serious about this. I mean hospitals, nurses, and doctors can be fined. They can be fined and have to pay a financial penalty if they share information with someone that's not authorized. You may be out of luck in getting that information. And, John, I've dealt with families who found themselves in this spot and the response they always tell me is that they get a little mean on the telephone because they're upset and they remind the hospital that, "Well, your patient may be an adult but she's on my insurance." or "I'm the one that's gonna end up paying the bill so you better talk to me." And that doesn't get them anywhere either. [chuckle]
No, and in fact, even your own insurance, if you have an 18-year-old or older that is covered under your insurance, your policy that you pay for, you will not be able to talk to that insurance company about that child. Even though it's your policy that you're paying for. So, you've got to have those four things.
That's right. But there's actually a fifth thing that we actually recommend for college-bound kids, in addition to those four, but we're gonna take a break and talk about that here in just a second, so stick around and we'll be right back.
Welcome back to Aging Insight everybody, I'm John Ross here with Lisa Shoalmire and today, a couple of elder law attorneys are gonna talk to you about college. That probably seems a little strange but the lots of grandparents out there, either raising grandkids, they're very close to grandkids or maybe you've just got some sage advice for those kids of yours who have kids that are heading to college. We wanna be able to fill your brains with some information related to this and the first thing we talked about was that everybody over the age of 18...
Everybody should already have in place a financial power of attorney, a medical power of attorney, a HIPAA release and a living will. These things apply to everybody but nobody ever thinks about it with kids, with 18-year-olds but those often, when tragedy does strike, injury or things like that, those things will make that process so much better and they're so simple to get on the front end and so hard if you don't have them.
Well, for instance, John, I encourage anyone who's sending a freshman off to college to get those documents signed. I mean, many families, and we'll talk about this in a moment, but many families are investing thousands of dollars into that college education for that young adult. Investing just a little bit to make sure that the communication lines are always gonna be available to the parent, boy, that's just an easy call. Should be done for every single young adult.
You know and if you think about it, an 18 year old that joins the military, before they deploy, their command will make them sign a financial power of attorney and a medical power of attorney and things like that because the military recognizes that these are adults and that they may be in dangerous situations that involve injury and stuff like that, so just because it's an 18-year-old going off to Iraq, legally it's no different than the 18-year-old going off to college station. If they get hurt, there's gonna be a problem, if you don't have the right paperwork, but there is one other little form out there because there's another law that's called the Federal Education Privacy Rights Act, better known as FERPA. And this law says that the educational records of an adult are private and that nobody, nobody can look at those records without the person's signed written permission... Signed written permission on something called a FERPA release, and Lisa, once again this is one of those laws that can stick in the craw of that parent.
Right, so imagine you wanna know, you're the parent or the grandparent of whoever, but imagine you're the person that wants to check and make sure and see how that student's doing. You just wrote a $10,000 check for the tuition, you're about halfway through the semester and you'd like to know what those grades are.
And guess what? You have no right to know anything about what that adult student's grades may be unless you have a signed FERPA authorization on file with that college or university's registrar's office and this really comes as a shock, to many parents just like the example earlier of if there's a medical emergency and the parent finally pulls the trigger and says, "Hey, look this kid is on my insurance and I'm gonna pay the bill, you better tell me information." Many parents say the same thing to the college registrar's offices and say, "Hey, I better have a right to their grades because I'm the one paying the bill." But the federal law says, "This is an adult student and their educational records must be kept private and cannot be released to anyone unless they are authorized under a written FERPA authorization." And this could be very frustrating to parents, so a FERPA form, John, is something that, once again, along with your four other documents; the financial power of attorney and medical power of attorney, that medical information, HIPAA release and that living will, a FERPA form is something else that should be included with every young adult who will be attending school.
Well, and not just... There is, certainly if you wanna be able to access that kind of information that's gonna be particularly important but the other side is, is if there are issues with the child, if they do become injured, if something bad has happened to them and for some reason you do need to get copies of that college's records, there may be a time where the student themselves is no longer able to sign something like a FERPA release and so you got to have that sort of thing prepared in advance and let's be honest, if we are talking about an 18-year-old who's headed off to college and you sit them down and have them sign a stack of papers that say that you as the parent or a grandparent or both parents and grandparents will be able to help with financial decision making and medical decision making and a FERPA release, let's be honest, they're gonna forget, that kid's gonna forget about it.
Yeah, they're excited about going off to school, they're gonna sign anything you put in front of them, but on that FERPA release, John, I have seen situations where colleges have, if a student has sought counseling services, whether that being mental health counseling or academic counseling services, that the college has taken the position that those are educational records and so even if your child has threatened to harm themselves and have talked to a counselor at the school, they take the position that they cannot reach out and inform you of that unless you have these documents.
Yeah. Gotta get that all that stuff. Now the bigger issue with the college is the cost of college and there is a lot of little financial issues related to that. So we are gonna take one more break and when we come back we're gonna talk about the free application for Federal Student Aid, better know as FAFSA and all of the things you need to know about it. So stick around, we'll be right back.
Welcome back to Aging Insight everybody. I'm John Ross here with Lisa Shoalmire and today we're talking about college and college planning, and all of that sort of stuff. We started out by saying that you need to make sure you've got some financial powers of attorney, and medical powers of attorney, and HIPAA releases, and living wills. But you also need a FERPA release so that you can get copies of those educational records. Those are some of the basics out there. I think what a lot of people are really interested in, though, is how are we gonna pay this exorbitant cost of college?
Right, it is. Very costly. I think the average in-state tuition and housing and all for a year or two semesters of college is over $20,000 in the state of Texas, in the state of Arkansas. And that's for a state school.
Right. This is just really, if you think about $25,000 as a cost, most families, that's very close to their entire year's earnings. Paying for college is a big deal. First and foremost, as we've talked about on this program before. Many students end up using student loans to finance college cost, and we have always given the advice that parents and grandparents should not, under any circumstance co-sign on an adult student's student loan. These loans are not dischargeable in bankruptcy. They never go away. Even if the child becomes disabled or dies, the loan is still the responsibility of that co-signing parent or grandparent. Our advice is to never sign off on a parent or student loan. Now there are student loans available to students that do not require co-signing, so if student loans are a factor in financing education, just make sure it's not one that requires a parent co-sign.
Things like Pell Grants, scholarships, certain state programs. I know Texas has something like the...
Yeah. There's a lot of these programs and almost all of them are going to be tied to information that is provided by the student/parents of the student on an application. This is the free application for federal student aid. Also known as FAFSA. FAFSA.
You will not be considered for any grants or any of the programs, even student loans or work study programs unless your student completes and submits a FAFSA form. It's absolutely required. There's no way around it. Unless you're just gonna write a check for the private cost, private pay for the cost of college, that FAFSA is gonna have to get filed. And John, that FAFSA document requires information about income and assets for both the student and the student's parents.
The last segment, we just talked all about how that student is an adult and that that student, the parent cannot access educational records and the parent can't access medical records. But yet, here we are on this FAFSA application, and the parent information is absolutely required. Isn't it interesting how they treat the student as an adult for some things, but as essentially a dependent on their parents when it comes to assessing their financial need?
That's right. Essentially what they're coming up with on this application is the estimated family contribution. How much can the family contribute towards the cost of this college education? Essentially so they can use that as a determining factor as to how much student aid in the form of Pell Grants or state programs that this child will need. From the very simple standpoint, let's just... Before we get into some of the other stuff, just think about the grandparent. I've had lots of grandparents in the past who have said, just in off-hand conversation I mention that I've got teenagers and they say, "Oh well we've got teenage grandkids and as a matter of fact, we were thinking about opening up an account in the name of our grandson, and going ahead and just sticking $10,000 in that account this year, and maybe another $10,000 in the account next year." Then that child will have a checking account in their name with 20,000 bucks in it that they can use to pay for college. And that is wonderfully generous of those grandparents. But, Lisa, what have they done?
All they've really done is basically ensure that that grandchild is not going to have any eligibility for any of the grant programs or the financial aid that is not required to be paid back. Because anything in the student's name is weighed more heavily on the FAFSA form than assets that may be held by a parent and certainly John, assets that are held by a grandparent aren't counted at all as far as the eligibility for student aid. So, by the grandparent taking that 20,000 and putting in the name of the students or the future student all they're doing is creating a higher estimated family contribution which means that money has to be spent on education cost and there is no eligibility for any grant program.
Yeah. So, if you're their grandparent and you are thinking about providing some funds for college, you really don't wanna put them in the student's name, under any circumstances.
And you really may not even wanna put them in the parent's name, in fact, you're probably better off just holding onto them yourselves. And in fact, because the way the FAFSA works, not only if you give them the $10,000 is that considered an asset of the parents or child but it's also the receipt of it is considered income, even though that's not taxable.
Well, that's what I was about to say. Even though the IRS doesn't consider that gift an income taxable gift, the FAFSA form does count it as income in a year that gift was received.
That's right. Now, interesting thing on this that the FAFSA actually looks two years back, so if you are applying for the 2017, 2018 tax year they're gonna be looking at what happened two years back. And generally, as a student goes forward the last FAFSA that they're going to file will be right there at when they are heading into their junior year, then they're gonna use that one for their last two years to determine eligibility. So, if you're a grandparent and you're thinking about paying for some of the college, you actually would probably better off letting the family pay for the first two years and then you pay for the junior and senior year because then that will have no impact at all, on their financial aid eligibility. Not to mention you get to see if they make it through the first two years.
There's so many moving parts to assisting a grandchild with college expenses, and there are ways to do it and to set aside assets in the event of your own health issues or frankly, your own death that you can make sure that there are assets available to that college student but we could probably do a whole other show on that.
Probably could. But we're reaching the end of this one. So we're gonna have to let you go. We will, of course, have another episode next week and you can always check out our past episodes on our website at aginginsight.com, you can even listen to the radio program on the internet or live every Saturday on our radio show, pick up a copy of our magazine if you see it out at your doctor's office. But we'll see you next week.
In this episode, John Ross and Lisa Shoalmire discuss college and college planning for your grandchildren: you need to make sure you’ve got some financial powers of attorney, and medical powers of attorney, and HIPAA releases, and living wills.