Starting a new job is an exciting new chapter in your life.
Depending on your company’s onboarding process, there can be a lot of moving parts. You may feel overwhelmed by the introduction and review of the many different types of employee benefits. Not only are there forms to be filled out, they need to be filled out properly to ensure that your true financial and estate planning wishes are carried out.
Beneficiary designation forms are an effective way for you to choose who should receive the death benefit from your employer-provided life insurance policy or the balance of your retirement account if either or both of these benefits are being offered to you as part of your employment. The beneficiary designation forms allow you to name a primary beneficiary and a contingent beneficiary in case the primary beneficiary is deceased. You have several choices when naming a primary beneficiary. You can choose one person, two people to split the death benefit or account, a charity, or even a trust.
Because the beneficiary designation will override anything written in a will or trust, it is important that you complete this form properly. If you do not fill it out and subsequently die, the account or death benefit will be distributed according to the default rules of the account or policy agreement. That may give the balance to your estate, which will require your loved ones to go through the costly, time-consuming, and public probate process and could result in adverse tax consequences because of a shorter payout period.
Stock or Other Ownership Interests
If you are being offered company stock or other ownership interests as part of your employment benefits, it is important that you understand what that entails before you sign any forms. Experienced financial, tax, and estate planning professionals should be contacted so they can help you understand what you have received. To properly plan, you need to know:
- the type of interest,
- when the interest vests,
- whether there any tax obligations or reporting requirements,
- what will happen if you leave your employment,
- what happens if you die while still employed, and
- how you can pass along your interest to your loved ones through your estate plan.
To safeguard the employment benefits, a foundational estate plan is key to ensuring a successful future.
- Last will and testament. This document, also known as a will, or a pour-over will if you also have a revocable living trust, can be used to name an executor or personal representative to wind up your affairs, direct what should happen with your money and property, and nominate someone as a guardian for your minor children if you have any. Your family will have to go through probate to receive any money or property controlled by the will.
- Revocable living trust. As an alternative to a standalone will, a revocable living trust allows you and your loved ones to avoid the probate process by transferring your money and property to a trust during your lifetime or naming the trust as a beneficiary of your accounts and property. In most cases, you are the trustee and continue to manage the money and property. In addition, you can continue to control and enjoy the use of the money and property during your lifetime. If you become unable to manage your financial affairs, a successor trustee that you previously selected can step in without court involvement and manage the trust on your behalf and for your benefit. You can also designate what will happen to the trust’s money and property at your death.
- Financial power of attorney. This document allows you to choose a trusted person to handle your financial matters (sign checks, open a bank account, etc.). In this document, you can specify the scope of the agent’s authority and when the agent can act. Without this document, a court will need to appoint someone if you need someone to handle a financial matter on your behalf.
- Medical power of attorney. This document allows you to appoint a trusted person as your decision maker to communicate or make healthcare decisions on your behalf if you cannot do so. Absent this designation, the court may be required to name someone to make these decisions for you, costing your loved ones time, money, and privacy.
- Advance directive or living will. This document, known by either name depending on your state, allows you to convey your wishes regarding end-of-life decisions. Properly documenting your wishes can make them easier to carry out and reduce tensions brought on by uncertainty.
- HIPAA authorization form. A Health Insurance Portability and Accountability Act (HIPAA) form allows you to grant specific individuals access to your medical information (e.g., to get a status update on your condition or receive test results) without giving those individuals the authority to make decisions on your behalf. Sometimes having information can help reduce tensions among the parties involved because everyone has access to the same information even if only one party has the authority to make any decisions.
Joining a new company is an exciting adventure. In addition to the human resources representative at your new company, Davis Law Group is here to help you protect the legacy you are in the process of building by creating a proper estate plan. Give us a call today to set up an in person or virtual consultation.