Planning for Young Adults — What Age 18 Really Means

Rights You Receive on Your 18th Birthday

Age 18 is referred to as the "age of majority" in the United States and much of the rest of the world. On your 18th birthday you receive — by operation of law — the right to: 1. Open a bank account under your own name and Social Security number only 2. Obtain a credit card 3. Vote 4. Purchase real estate or stock in your own name only 5. Open a 401(k), IRA, or Roth IRA 6. Sign contracts enforceable against you 7. Sign a Revocable Living Trust 8. Sign Powers of Attorney for Finances & Health 9. Sign Living Wills 10. Sign Transfer on Death Deeds 11. Sign a Last Will & Testament 12. Marry without parental consent 13. File a tax return in your own name and Social Security number That is a lot of rights and responsibilities to receive all in one day.

Powers of Attorney and Advance Directives

Many colleges and universities require students to submit powers of attorney for finances and health so that it is clear what the student's wishes are regarding communication of private healthcare, financial, and other private information. An 18-year-old has the right to create powers of attorney for finances and health, a living will, and an advance directive for mental and behavioral health issues including addiction and inpatient treatment. The power of attorney for health includes an organ donation election. Keeping electronic emergency contacts in a young person's phone and on paper behind their driver's license helps ensure that family is notified right away of any issues.

Separate Property Trust Accounts

A separate property trust clearly labels property held before marriage and becomes irrevocable when a person dies. That can be empowering, especially for young women. A young woman with her own money — money that remains hers even if she marries — is empowered. Having separate property accounts set up early can be useful when dating and discussing engagement — the other person's reaction is telling. This is also a hedge against divorce. The Court has jurisdiction over community property, not separate property. Once the Court finds that property is separate, the Divorce Decree simply confirms that separateness.

Beneficiary Designations Naming the Trust

If a young person opens a Roth IRA and names their separate property trust as beneficiary — and names their trust as beneficiary of their 401(k) when they start working — they are well ahead of most people. Their retired self will thank them. By naming a beneficiary while single, a young person also learns that such a designation is not valid after marriage unless a written waiver or consent form is delivered to the account holder.

Credit, Credit Reports, and Credit Freezes

Having one credit card with the payment deducted in full so a balance is never carried, checking free credit reports annually (or every four months at a different bureau), and placing a credit freeze will get a young person started out right. A credit freeze protects against identity theft during life and protects against fraudulent credit being issued after death.

Voting and Passport

An 18-year-old also has the right to vote and should register right away. Washington has voting by mail, so as long as a person keeps voting, ballots keep being mailed. A passport is proof of U.S. citizenship. An 18-year-old obtaining a passport is especially helpful for racial and ethnic minorities — being able to easily prove citizenship can be useful even if foreign travel is not planned.

Unmarried Parties Buying a Home Together

When unmarried people buy a home together, several issues tend to arise. 1. How to Take Title at Purchase — Unmarried people can take title as Joint Tenants with Right of Survivorship, or as Tenants in Common (each can pass their undivided interest to their heirs). They may also choose a percentage other than 50/50 to account for unequal contributions. 2. Changing Title After Purchase — Parties can record a Quitclaim Deed to themselves, their Trusts, or their LLCs after purchase. WARNING: Changes in title do not affect Promissory Note obligations — that requires a refinance or sale. 3. How to Address Unequal Down Payment Contributions — A Promissory Note and Deed of Trust can be signed in favor of the party who contributes more to the down payment. 4. Estate Planning & Home Buying — Buying a home and estate planning go hand in glove. A Transfer on Death Deed for the home is part of the estate plan. Powers of Attorney for Health and Living Wills are especially important for unmarried parties, who otherwise may not be able to speak with doctors about each other's care.

Conclusion

Young people who have some financial and legal sophistication early in their lives are less likely to get into debt problems, more likely to save for retirement, more likely to vote, more likely to correctly file tax returns, more likely to do their own estate planning, more likely to take better care of their parents when needed and to administer their estate without disputes — and more likely to encourage their own children to obtain the same kind of financial and legal sophistication that benefitted them. Peace and harmony through generations of families can be promoted by having a common basis of knowledge and values.