HR Managers Should Consider Estate Planning
Before we look at the reasons why human resources managers should encourage their employees to embrace estate planning practice, it is important to provide an elaborate definition of estate planning. In simpler terms estate planning is have a plan in advance that would see one determine and name person who will inherit his/her wealth upon death.
There is a notion by employees that they do not have estates. However, this is not true because nearly everyone owns an estate. Human Resources Managers should take the responsibility of sensitizing their respective employees of their estates. Employees in several organizations own homes, cars, saving accounts, checking accounts, furniture, investments, personal possessions, life insurance and real estate. They do not have any knowledge that these things form the estates they own. The reason why these are considered as estates is because an employee cannot take them with him/her when they die.
Estate planning becomes very important for employees more so when they care about who takes over your properties upon death. For the wishes of the employee to be executed upon his death, instructions need to be formulated with an attempt to state who receives the properties, what they should receive and when it should be presented to them. One would want all these transactions to be carried out with minimum court costs, legal fees and taxes.
Human resource managers should have an understanding that most employees who fall in the middle class tend to think that they should not embrace estate planning. They believe only their counterparts who earn more should conduct estate planning. This misunderstanding has caused several employees to exhibit apathy towards estate planning. Human resource managers should therefore help their employees to understand that everyone is entitled to conduct estate planning because no one owns anything in this world.
Employees tend to think that they should consider estate planning upon retirement or when they are approaching retirement. They tend to forget that death is inevitable and cannot be planned for. It comes when no one expects it. Human beings cannot determine their lifespan; they cannot control accidents and illness.
Most employees spend most of their working life trying to obtain more wealth before they can start thinking of estate planning. It is however, not a guarantee that death will wait for them until they have gathered their desired wealth. It is the responsibility of the Human Resources managers to explain to their employees that they should embrace estate planning upon getting employed with the little properties they have gathered.
It is not a surprise to walk into any organization and meet almost all their employees do not conduct estate planning. They normally have varied reasons why they have not embraced estate planning. Some of the reasons that you are likely to hear in case you inquire why most employees include: do not know the right people to consult on the matter; they are still very young to conduct estate planning; they have little wealth; they do not want to think about estate planning; or they do have to carry out estate planning. However, it becomes an issue when these particular persons become incapacitated or worse when they meet their death because their families are forced to suffer the agony of accessing his/her estates. At this particular moment, Human Resource Managers are forced to look at all the possible means of providing the benefits of the employees to their respective members. Both federal and the State governments will get the opportunity to impose very high tax on the estates of the affected employee because he/she ignored the concept of estate planning.
Human resources managers should advice their employees accordingly on the issue of estate planning. He/she should inform them that upon failure to plan their estates, their respective states will plan them on their behalf. Their worry should be the terms and conditions upon which the planning will take place. Any employee in his/her right minds would not allow the state to plan their estates because of the repercussions it will have on their families. In case an employee becomes disable without planning his/her estate then the state will take over the estate. In case of physical or mental incapacity, then the state will assign a court appointee who would sign on behalf of that particular employee. The assets of the employee will be controlled by the court but not the family members who actually have the interest of the employee at heart. The process can prove to be futile, expensive and open to public scrutiny. It may take a lot of time and resources for the employee to regain confidentiality of his/her estates upon recovery. Human resource managers should consider estate planning for their employees in order to protect them from such situations.
The situation may become more complicated when an employee dies without leaving behind any estate plan. In this case, the organization will have absolutely nothing to do in preventing the state to take control over the estates. The spouse and the children of the employee will be entitled to the share with each of them receiving a fraction. Most of the time, the spouse of the employee will be left with a fraction of the estate that may not sustain him/her. The minor children of the employee will have their inheritance controlled by the court and not even the surviving parent. The situation becomes more complicated in case the employee dies in a car accident alongside his/her spouse. The state will endorse the court to appoint a guardian who will control the estate on behalf of the employee’s minor children.
I tend to believe that these are situations that employees may not want themselves or even family members to get exposed to. However, in most cases, the employees lack this important information. Human resource managers have the responsibility of recruiting, training and retaining employees. They should therefore take the responsibility of informing their employees of the importance of planning their estates.
Some of the employment packages such as 401(k)s and life insurance and annuities are very important for the business. Employees normally own other assets alongside these employment benefits to form their estates. These employment benefits can be transferred to beneficiaries upon incapacitation or death of an employee. Each and every employee of any organization is entitled to these benefits therefore they own estates that they can pass over to their family members either through a will or a trust. Employees can be encouraged by their human resource managers to write wills or leave trust for their beneficiaries.
Estate planning process start by either writing a will or leaving a trust for the beneficiaries. Employees should understand that instructions they include in their will have to undergo probate upon uncertainty. However, human resource managers should inform the employees that any will they write on their employment benefits such as 401(k)s and life insurance cannot undergo probate before they are distributed to the heirs. Employees should also understand that failure to write a will, the employment benefits will be taken over by the respective estate and distributed through the court system. This excludes the employees the right to determine who inherits their employment benefits, how much they inherit and how they should receive these particular benefits.
Human resources managers are the immediate seniors of the employees in any business organization. They should inform the employees of not only the changes that have affected their income taxes but also their estate taxes. Changes in the estate tax and income tax law affect the process of estate planning for an employee.
Estate planning by the employees is good for the business because it would cushion the family of their employees from suffering in case of death or disability of the employee. There are several advantages of estate planning which will benefit the employees and save the reputation of the business organization as well. Human resource managers manage to convince their employees to plan their estates in order to achieve the following benefits:
The employees will be able to leave behind enough money to sustain their family members in case they die. Through proper estate planning they would ensure that their children are brought up accordingly and are educated to the required level. Estate planning enables the employees and their couple to nominate in their wills a personal guardian who would take care of their children in case they die together while they are still minors.
The employees will be in a position protect their asset from being inherited by beneficiaries who are not intended. The employment benefits will be entitled to the surviving spouse and the children of the deceased employee. The process will even be faster in case a proper estate planning was conducted by the employee. In presence of a will employment benefits will be administered to the beneficiaries without any probate.
Proper estate planning will enable an employee to plan for incapacity in case it happens. Employees are capable to encounter physical or mental incapacity may be due to car accidents. When such a situation arises, the company will not be able to pay the employee because he/she will not working. In most cases, employees are the breadwinners of their families and disability may mean suffering to the family members. Employees can have living wills and healthcare powers which are to determine the one who make decisions on their medical treatment.
Employees are able to eliminate family messes when they become incapacitated or when they die. Family members tend to war against each other with some thinking they deserve more than others. The most common cases occur when an employee experiences physical or mental incapacity. The estates of several employees normally end up being handled in the way their owners did not intend them to be simply because they did not plan their estates properly.
In conclusion, HR managers should consider estate planning to their employees to avoid watching their estates being mismanaged or given to unintended beneficiaries upon their death.