Financial Planning for Empty Nesters

October 18, 2025

Congratulations are in order! You planned, saved money for education expenses, and now your child is off
to college. But as you settle into your “empty nest,” you might be wondering, now what? It’s time to figure
out how to adapt to your child’s new independence while keeping your family on a steady course financially.

Here, we’ll focus on some common financial planning issues encountered by empty nesters (or those
soon to be!). From finding new ways to save to considering powers of attorney, learn how to navigate this
exciting transition while planning for the next phase of life.

Are College Students Kids or Adults? It’s Complicated

The rules governing financial matters for young adults are, in a word, complicated. College-age
students do gain financial responsibilities and can often begin independent investing. But, in many
cases, a child’s financial status doesn’t change immediately when he or she turns 18.

The “kiddie tax” applies to many full-time students who are age 23 and younger. And college students
younger than age 26 can be included on their parents’ health care coverage. On the other hand, while
many states provide that UTMA accounts do not terminate until age 21, most states give 18-year-olds the
legal status to open new accounts on their own. And if a child plans to work part-time during school or the
summer, he or she will have earned income and could begin contributing to a Roth IRA.

Health Care and Financial Powers of Attorney
You’ve no doubt filled out a litany of emergency contact forms and reviewed emergency preparedness
plans in connection with your child’s on-campus housing. Now, it’s time to consider the value of health
care and financial powers of attorney for your college student.

Generally, powers of attorney provide broad authority to a named agent to manage all aspects of that
person’s finances and important health care decisions, especially in times of need or incapacity. Many
states offer statutory forms, which are readily available through the state’s bar association or local
probate courts. But working with an attorney to craft your desired powers and restrictions is encouraged
so that the overall impact of executing such a document is understood.

Properly executed documents in the student’s home state are typically accepted across state lines. If
your student attends school out of state, however, it’s worthwhile to consult an estate planning attorney.
You may want to work directly with an attorney in the school’s state to ensure that the documents will be
effective if needed. Typically, health care directives are state specific, so you will benefit if your
documents are familiar to health professionals in the state where the student will reside.

Financial powers of attorney, through the Revised Uniform Fiduciary Access to Digital Assets Act, are a
useful tool for managing our ever-growing digital presence. If something were to happen once your child
is a legal adult, you may not be able to access information in his or her email or social media accounts.
In addition, mobile apps such as Venmo, PayPal, or DraftKings might contain a monetary value.

Similarly, if your children are older than 18, you might not have access to important health information in
the case of an emergency. That’s why it’s so important to understand the advantages of health care
powers of attorney and living wills. Having these types of directives in place can provide you with peace
of mind, while also clarifying your child’s wishes on issues such as organ donation and palliative care.

Time to Switch Gears
Over the years, you’ve likely been focused on saving, saving, saving. Now that your child is off to college,
it may be time to switch gears. Your college funds will likely have been accumulating through different
savings vehicles, with each one governed by a complex set of regulations. It’s important to spend these
funds wisely.

529 plans. When it comes to 529 plans, everyone tends to remember that these funds should be spent

on something called “qualified” expenses. But where does the IRS draw the line on what’s qualified and
what’s not? Generally, qualified expenses cover all tuition and fees, room and board, and supplies directly
related to the student’s education, including computers and software primarily used for school. Keep in
mind, though, that travel costs, extracurricular activity fees, and health insurance are not qualified expenses.

UTMA accounts. How to pay for those expenses 529 plans don’t cover? For things like travel to and from
campus and the can’t-be-missed trips over winter and spring breaks, a child’s UTMA account can fill in
the gaps. Because minors typically become old enough to receive legal control of UTMA accounts during
their college years (as discussed above), these funds give students a good way to pay their extra expenses.
Keep in mind that suddenly having control over their finances is a big transition for students. As such, take
some time to help your children understand the importance of expense management and saving.

Tuition payment. If funds from a 529 plan won’t cover the entire amount necessary for tuition, room and
board, and school supplies, you might want to consider direct payment of tuition. If you take this option,
the rules on gifting come into play. Tuition expenses paid directly to the qualifying educational
organization are exempt from counting toward the annual gift exclusion amount of $19,000 per person,
per year, for 2025.

The overall rules are complex, however, so you’ll need to carefully monitor all other payments made to or
on behalf of the student to ensure that you don’t exceed the annual exclusion limit. It’s also important to
consider other regular gifts associated with your estate plan. For instance, you might factor Crummey
contributions into the $19,000 exclusion you anticipate using to provide extra funds to your children.

Small Ways to Save Big
And now back to a familiar topic: saving! Finding new ways to save money is an essential part of financial
planning for empty nesters. Perhaps you’re thinking ahead about how your housing needs will change
when your children go off on their own. Or, if you’re planning for retirement, you might be considering
moving to a retirement-friendly state. In either case, downsizing is just around the corner. But even before
that time comes, you might be able to save in small ways that could add up over the years. Here are
three simple tips to get you started:

1) Auto insurance discount. Many of the major auto insurers offer a “student away at school”
discount to policyholders.
2) Home energy assessment. Are rooms in your home going unused now that your kids and their
friends aren’t around all the time? It might be worthwhile to seek the input of your energy
providers. Most utilities around the country now offer free home energy assessments. In
addition to money-saving advice, these programs often offer discounts for further improvements
and upgrades.
3) Subscriptions review. What about all those subscriptions you have amassed over the years?
Whether for magazines, gym memberships, music streaming, photo or file storage, or video
streaming services, these subscriptions might not be necessary anymore. Canceling unused
subscriptions or coordinating services with the college student’s roommates could save
hundreds of dollars a year.

Blue Skies Ahead
Understandably, becoming an empty nester can be a time of uncertainty for many. But armed with the
right strategies, you and your children will successfully navigate this leg of your family’s financial journey.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although
we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional
tax advisor, or lawyer.