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How the Employee Onboarding Process Can Affect Your Estate Plan

Posted by Gregory Robinson | Jun 16, 2021 | 0 Comments

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 Designations

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 (as backup in case the primary beneficiary is deceased or does not want the money). 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. Note that, in some circumstances, your employer's plan may require that your spouse be listed as the primary beneficiary of the retirement account or consent to someone else being named as primary beneficiary.

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, which may give the balance to your spouse or heirs, as defined by the plan agreement or applicable state law, or 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 you may be offered, a foundational estate plan is key to tying everything together for 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 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 (an agent or attorney-in-fact) 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. This can take time and money that may not be available in the midst of a crisis.
  • 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, we are here to help you protect the legacy you are in the process of building by creating a proper estate plan.

About the Author

Gregory Robinson

Attorney Gregory Robinson is a native of Alabama. He earned his Juris Doctor (J.D.) degree from Mitchell Hamline School of Law and holds a Master of Business Administration (MBA) degree from Rice University. Prior to practicing law, he worked as a strategy consultant in the financial industry...


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