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August 30, 2013 at 10:00 PM
As students leave home for college this month, many wealth advisors can take pride in having helped the parents save and invest over their working lives to pay for the cost of an undergraduate or graduate education. At the same time, advisors have the opportunity to offer the parents, their clients, one last piece of advice: make sure you have protected your college savings and the other assets from the threat of a high-stakes liability lawsuit. A child away at college raises new and heightened possibilities for lawsuits that could come back to the parents’ doorstep.
Five Risky Situations
Here are a few high risk situations that warrant attention:
- Lending cars to friends. A client’s child at college with a car may drive responsibly, but what about the fellow students who ask to borrow the car? In some cases, a student’s car becomes the house car, with the keys near the entry way for anyone else who needs it. Liability follows the car owner. If a student’s friend borrows the car and causes an accident resulting in serious injury, the student’s parents will likely find themselves first in line for a multi-million dollar lawsuit, especially if they have substantial assets.
- Borrowing cars. If the client’s child does not have a car, he or she will likely want to borrow a friend’s. How well insured is the friend? If the child causes a serious accident and the owner has insufficient insurance, the insured party will target the child’s parents next.
- Driving abroad. Many students take a semester of schooling abroad where driving laws and customs could differ greatly from those in the U.S. Driving in those unusual conditions puts the student at greater risk for an accident.
- Hosting parties. There’s no way around it at college: parties happen. If the student lives off campus and hosts a party, the parent could be held responsible for a variety of tragic outcomes. In one case, a teen suffered permanent brain damage due to overdosing on prescription medications during a party at a friend’s house. The parents were held partly responsible for a $4.1 million settlement.
- Social media misjudgments. The potential widespread distribution of social media posts and supposedly private text messages have greatly increased the risk of lawsuits claiming invasion of privacy, character defamation and more. In one case, a university student used a webcam to secretly film his roommate in embarrassing circumstances and then told others what he was seeing through social media. The roommate learned of the exposure and ultimately committed suicide, resulting in a criminal case against the student who did the filming. Many times, a civil case follows, seeking substantial damages.
Six Solutions to College-Child Liability Issues
