Gabriel Katzner - August 9, 2021 - Estate Planning

Congratulations! If you’re reading this, you’re probably starting or have recently started a new job. The onboarding process can be intimidating, especially when it comes to reviewing employee benefits and your options. As human resources sends you form after form, it is critical that you carefully review them to ensure that your choices reflect your financial and estate planning objectives.

Beneficiary Designations

If you have the option for employer-provided life insurance or a death benefit from your retirement account balance, you will need to designate your beneficiaries. The beneficiary designation forms allow you to select a primary beneficiary and contingent beneficiaries. Your primary beneficiary will receive your death benefits if something happens to you. Your contingent beneficiaries will receive the benefits if your primary beneficiary is deceased or does not want to accept the money.

You have several options when naming a primary beneficiary. For example, you can name an individual, two people to split the money, a charity, or even a trust.  In some cases, your employer may require that you name your spouse as your primary beneficiary. Alternatively, they may require that your spouse consent to naming someone else.

Your beneficiary designation takes precedence over the instructions listed in your Last Will and Testament. If this form is not completed or completed incorrectly, the distribution of your death benefits may be governed by the rules of your account or policy agreement. In this case, your death benefits or retirement balance be distributed to your spouse or heirs in accordance with the plan agreement or any applicable state laws. However, it may also go to your estate. If this happens, your loved ones will be required to go through the costly, time-consuming, and public probate process. In addition, going through the probate process frequently results in adverse tax consequences because of a shorter payout period.

Stock and Other Ownership Interests

Suppose you are offered company stock or any ownership interest as part of your employee benefits. In that case, it is a great idea to consult with an experienced financial, tax, or estate planning professional before signing any forms.

It is important that you understand the full implications of what you are signing and that your questions are answered regarding:

  • The type of interest earned
  • When the interest becomes vested
  • Whether there are any tax or reporting requirements
  • The consequences of leaving your employment
  • The consequences if you should die while being employed
  • How you can pass your interests to your loved ones through your estate plan.

Starting a new job is a great time to establish a foundational estate plan to safeguard your employment benefits and set a foundation for your future financial security.

Last Will and Testament

Your Last Will and Testament (pour-over will if you have a revocable living trust) can be used to name an executor or personal representative to take care of your end-of-life affairs, direct how your money and property should be distributed, and nominate someone as the guardian for your minor children if you have any. Your family will need to go through the probate process to receive any money or property controlled by your will.

Revocable Living Trust

You and your loved ones can avoid the probate process with a revocable living trust. A revocable living trust is an alternative to a standalone will and can be used to transfer property and money to a trust during your lifetime. Another option is to name the trust as the beneficiary of your accounts and property.

A revocable living trust offers the following benefits:

  • In most cases, you will be the trustee throughout your lifetime and continue to manage your money and property.
  • You will continue to enjoy the use of your money and property throughout your lifetime.
  • If you become incapacitated, the successor trustee you have named can step in and manage your affairs without involving the court.
  • You can designate what will happen to your money and property in the trust, upon your death.

Financial Power of Attorney

A financial power of attorney allows you to choose a trusted person, commonly called an agent, to handle your financial affairs should you be unable to continue to do so. Examples of financial matters your agent might sign include signing a check for you or opening a bank account.

In your financial power of attorney, you can specify the scope of your agent’s authority and the circumstances under which they have the authority to act. Without a financial power of attorney, if you are unable to handle your financial affairs, a court would need to appoint someone to handle your financial matters for you. This process may cost you time and money while you are in a crisis situation.

Medical Power of Attorney

This document allows you to appoint a trusted person to communicate or make healthcare decisions on your behalf if you cannot do so. Without a healthcare power of attorney, the court would need to step in and name someone to make these decisions for you. This process can cost your loved ones time, money, and privacy.

Advance Directive or Living Will

An advance directive or living will allow you to express your wishes regarding end-of-life decisions. For example, documenting such choices as to whether you would like to be placed on a breathing machine if you cannot breathe independently can make them easier for your loved ones to carry out. It can also reduce tensions between people who may not fully support these choices.

HIPAA Authorization Form

A Health Portability and Accountability Act (HIPAA) form allows you to designate specific individuals who can access your medical information. For example, suppose you were in an automobile accident, and your mother called to check on your status from out-of-state. A signed HIPAA form permits healthcare providers to tell your mom how you are doing without giving her permission to make healthcare decisions for you.

As you can imagine, it would reduce tensions in the family if appropriate health information can be shared with your loved ones.

Your new job is likely to be an exciting and sometimes stressful adventure. However, we are here to decrease your stress when protecting your financial legacy by helping you create the foundation of an estate plan.

You can schedule a call with us or reach us directly at 855.631.3457 to learn more about how best to plan today to protect those most important to you.

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