When Your Child Turns 18: Financial and Planning Considerations for Parents
A college freshman is injured in a car accident. Her parents, who pay her tuition and insurance, drive three hours to the hospital—only to learn they have no legal right to her medical information.
Turning 18 is one of those milestones that feels symbolic more than practical. There’s no graduation ceremony, no obvious lifestyle change, and for many families, daily life looks exactly the same as it did the day before. But from a legal and financial standpoint, something significant happens overnight: your child becomes a legal adult.
That shift brings both independence and responsibility. It also introduces a planning gap that many families don’t discover until a crisis forces the issue. With a bit of foresight, this transition can be handled calmly and thoughtfully, setting your child up for independence while preserving coordination and protection when it matters most.
This post is written primarily for parents, but with the understanding that much of this information will ultimately be shared with your newly adult child. Think of this as a framework for conversations, decisions, and next steps.
1. What Legally Changes at Age 18 (Often Without Warning)
At 18, your child is legally recognized as an adult in the eyes of the law. That change is immediate and sweeping.
As a parent, you no longer have automatic authority or access to:
Medical information or decision-making
Financial accounts in your child’s name
Educational records (including college records)
Legal or administrative decisions
This is true even if:
Your child still lives at home
You are paying for tuition, insurance, or medical care
You are financially supporting them in every way
In most cases, institutions are not being difficult; they are complying with privacy and consent laws. The practical implication is that good intentions and close family relationships do not substitute for legal authorization.
This is not about reducing your child’s independence. It’s about recognizing that adulthood brings new boundaries and planning accordingly.
2. Documents Worth Putting in Place (Access, Not Control)
One of the most important planning steps at age 18 is establishing a small set of legal and healthcare documents. These are rarely needed, but invaluable if they are.
Healthcare Power of Attorney and HIPAA Authorization
The first document worth discussing is a healthcare power of attorney (sometimes called a medical proxy). It allows your child to designate someone to make medical decisions if they are unable to do so themselves. A HIPAA authorization allows medical providers to share information with designated individuals.
Without these:
Parents may not receive updates during a medical emergency
Hospitals may be limited in what they can disclose
Coordination becomes difficult during already stressful moments
Durable Financial Power of Attorney
A durable financial power of attorney allows a trusted person to act on your child’s behalf for financial matters if they become incapacitated.
A common question is whether this should be:
Immediate (effective upon signing), or
Springing (effective only upon incapacity)
In practice, immediate powers of attorney are often easier to use. Springing powers often require proof of incapacity, which can delay matters when time is critical.
It’s important to emphasize to your child that these documents do not grant parents ongoing control. They should sit in the background and remain unused unless circumstances require them.
Living Will or Advance Directive (Optional)
While uncomfortable to think about, even a basic advance directive can help clarify wishes and reduce uncertainty in extreme situations.
3. Account Ownership Changes and Custodial Transitions
Age 18 is also when ownership of financial accounts can quietly change.
Custodial Accounts (UGMA/UTMA)
If you’ve saved for your child in a custodial account, ownership eventually transfers fully to them. The exact age depends on state law and how the account was set up (often age 18 or 21, and in some cases, extendable to age 25)
Once the account terminates, the assets legally belong to your child outright. Parents automatically lose control over how the funds are used, and there is no mechanism to reverse this.
This doesn’t mean custodial accounts were a mistake, but it does mean families should be intentional about timing, expectations, and communication.
Contrast With 529 Plans
529 plans are often misunderstood in this context. The parent typically remains the owner and retains control, even after the child turns 18. This makes them a useful planning contrast and a good illustration of why account titling matters.
Bank and Brokerage Accounts
Teen or joint accounts may convert to individual accounts at adulthood. Parents should not assume continued visibility, authority, or online access. It’s worth reviewing each account to understand what changes, if anything, at 18.
4. Helping Your Child Build a Strong Financial Foundation
Beyond protection and paperwork, this is also a powerful coaching moment.
Establishing Credit Thoughtfully
Credit history matters, but early mistakes can linger for years.
Common starting points include becoming an authorized user on a parent’s card, a starter or secured credit card, or a student card with low limits
The fundamentals matter more than the product:
Pay every bill on time, in full
Keep balances low (less than half of the credit limit)
Avoid using credit to fund lifestyle inflation
Protecting Their Identity
Young adults are frequent targets for identity theft, often because they have clean credit histories, and they are less likely to monitor credit activity.
A credit freeze is often a simple and effective default, especially if your child doesn’t plan to borrow in the near future.
Taxes and Income Awareness
If your child is earning income, they may need to file a tax return. If investments are in their name, capital gains and other income may now be fully taxable to them. This can be a good teaching opportunity around tax refunds, which are not “free money” but evidence of over-withholding.
Adults may also still be claimed as a dependent if they’re receiving more than half of their support from someone else.
Insurance and Risk Considerations
Turning 18 doesn’t eliminate risk; it changes who is responsible for managing it. Health insurance coverage can continue under a parent’s plan until age 26, but privacy rules change at 18. Auto insurance should be reviewed alongside vehicle ownership and liability exposure. Renter’s insurance may be appropriate for dorms or off-campus housing.
5. Framing the Conversation as a Parent
How this is presented matters as much as what is presented.
This works best when framed as:
“Here’s what legally changes.”
“Here’s how we stay coordinated in emergencies.”
“Here’s how we help you avoid avoidable mistakes early on.”
The goal is not control. It’s preparedness, trust, and shared understanding.
If Your Child Resists
Some 18-year-olds will push back on signing powers of attorney or sharing account information. This is normal. They're testing boundaries, asserting independence, or simply uncomfortable thinking about worst-case scenarios. Forcing the issue rarely helps. Instead, consider giving it time. Many young adults who resist at 18 are more open to the conversation at 19 or 20, particularly after they've had a close call (a friend's hospitalization, a billing dispute, a lost debit card abroad). You can also reframe the documents as protection for them, not oversight: "This isn't about me controlling your life; it's about making sure someone you trust can help if you can't advocate for yourself." If resistance continues, respect it. These are ultimately their decisions to make, even if you disagree.
Handled well, turning 18 can be less about “letting go” and more about shifting roles. Thoughtful planning at this stage helps young adults step into independence with confidence, while giving parents peace of mind that the right guardrails are in place if life takes an unexpected turn.
