Navigating Logistics

Photo by Peter Alexander Rob

This particular entry is both as glamorous and as necessary as life insurance. These are the topics that no one enjoys discussing.  However, a lack of attention to them can cause far more discomfort than a basic analysis of facts.  You are opening up your heart, your home and your life to individuals who may or may not want to be there.  It’s impossible to open your life to another without giving them some degree of access to your finances and general livelihood.  I say this, as always, from personal experience.

One particular child of mine was loaned a car to travel back and forth to college and work.  After a period of time, they became involved in a relationship, became heavily involved in drug use, took the car, and left town.  Now obviously this was not the original intent when I loaned this child the car.  Undeniably, something went terribly wrong.  At this point, my primary concern was to minimize the extent of the damage that could come from their choices or, at the very least, to minimize the collateral damage.  I sought advice from several trusted sources and financial advisers. From which I quickly learned that should this child be involved in a wreck, I would be held financially liable.  Not only would I be held liable, but in a civil lawsuit a judge could allow someone to latch-on to my paycheck for the rest of my life, take any profits if I were to ever sell my house and even prevent me from filing bankruptcy. Now, these are Texas laws, your state may be different, but I mention this to make you aware of the gravity of the situation not to give you a crash course in civil law.  This was serious. I had to take action quickly. Upon doing a bit of research, I also learned that I could file a “Vehicle Notification Transfer” form with the DMV. This would, in theory, remove me from any liability should she become involved in a motor vehicle accident. Shortly thereafter, I was able to express to her the need to obtain her own insurance as I would soon no longer be able to leave her on my policy due to the potential liability. This scenario brought with it a multitude of questions that I had never previously considered.  Obviously, I feel that it is vital to help a young adult transition into independence.  Otherwise, you are merely setting them up for failure by merely emancipating them into the “real world” at the age of eighteen.  Still, I had not only a responsibility but an obligation, to protect the remainder of my family from emotional and financial turmoil.  You see, the effects of her lifestyle choices went far beyond the car.  I had also co-signed on an apartment for her – of which she walked out on the lease and left the apartment in a state of disarray.  Fortunately, I was able to pay the fees to forfeit the lease, the apartment manager was able to lease the apartment to another individual and approximately $3000 later my credit was salvaged - again, not ideal circumstances.  This also had a definite effect on the remainder of our family as it wiped out all savings we had at that particular time.  Which brings with it the question, how do both support and propel a child into adulthood with minimal risk of financial ruin. For what it is worth, this is my advice.

1.     When a child turns 18 (prior to eighteen, you will be held liable regardless of whose name the car title states), purchase them a car that is entirely in their name.  It does not need to be glamorous or expensive.  Do not allow them to take your car with them when they move away from your home unless you put the title of the car in their name.  Only allow them use of your car if they are drug and alcohol free.  Remember, you can and probably will be held financially liable for any damage they cause while in your vehicle.

2.     Remove your child from your insurance at the age of eighteen.  You could purchase them their own separate policy at this age and I would highly recommend doing so.  This will serve to further limit any personal liability should they have an accident. 

3.     Increase all personal injury and property damage coverage to the the maximum limits offered by your insurance when your kids are between the ages of 16 and 18.  It is better to be cautious and over-insured than pay a much higher price down the road.

4.     Allow you kids to live at home or get them their own place but consider this to be a gift.  Do not place your name on any lease that you could not pay in full if circumstances required such.  This does not mean that they shouldn’t be expected to contribute if working doesn’t interfere with their college studies.  It is simply self-preservation should they not hold up their end of the bargain.  Many junior colleges have excellent rates on dorm rooms that can be paid in whole or payments made.  A junior college approximately an hour from our home offers “apartments” as low as $725 / semester.

5.     Be certain you have a will and adequate life insurance should anything happen to you.  Consider setting up a trust so that children are only given large sums of money for necessary per-determined expenses or at particular rites of passage such as “upon completing a bachelor’s degree or certification program at an accredited college” or “upon turning 25.”  This formatting of the trust could protect and provide for them in the event of your untimely passing without funding detrimental choices.

6.     Do not share bank account passwords or other financial information with your children even if you currently deem them trustworthy.

7.     Enroll in an extensive credit monitoring/protection program.  This will cost a monthly fee but alert you to any changes in your credit - including anyone using your social to apply for an apartment, credit card or loan.  Check this regularly and consider it a form of monthly insurance for your financial future.

8.     Seek wisdom and advice from financial experts.  There are so many avenues to help protect your families’ finances.  Establish a Roth IRA, trust fund, and seek out a competent attorney who is well-versed in both family law and your family circumstances to best advice you in how to  propel and protect your family.

None of this advice is meant to be hurtful or build mistrust in a family. These are steps that should be taken with great care. I was once told by a rather wise person that “hurting people hurt others.” This could not be a more accurate statement. Often times, when you take hurting people into your home, you become the collateral damage. Do your best to act in a wise and rational manor so as to protect yourself and all others in your care.