Whether starting a career or transitioning to a new one, financial and estate planning can be crucial components in creating a successful future.
It’s important to create, review or update financial documents and estate plans, with any of the following scenarios:
○ Graduation from high school, trade school, or college. If this is the first time you’re entering the workforce, you may need help navigating the financial and estate planning forms during the onboarding process at the new job. You most likely may not have a financial or estate plan yet and may need to create one.
○ You moved to a different state to take a new job. This person has undergone two major changes, taking on a new job and moving to a new state, that make reviewing existing financial and estate plans beneficial.
○ Employer-provided life insurance. During the onboarding process, you may be handed a form or provided a link to complete the beneficiary designation for an employer-provided life insurance policy, which you may need help understanding. It is also important to review your designation periodically to make sure it still reflects your wishes.
○ You have an employer-sponsored retirement plan. You may be instructed to name a beneficiary of an employer-sponsored retirement plan but may need help understanding your options. It is also important that you periodically review your designation to make sure it still reflects your wishes.
To protect the future you are creating, you need proper financial and estate planning. There are some things you should put in place or review in order to set yourself up for success
- A comprehensive budget. If this is your first job, you need to review your income, expenses, and savings as the first step on the path to financial success. It is easy to see that first paycheck and imagine all of the things you can buy without taking the time to plan for existing expenses or setting aside money for future needs such as retirement. If you have landed a new job, changes in your income can impact your lifestyle immensely. If your income has increased, a financial professional can advise you on the best way to maximize the additional funds. If your income has decreased, a financial professional can offer crucial guidance on how to make the most of what you have.
- Proper insurance coverage. A new job may bring the need for big-ticket items. If you have to relocate for the job or are moving out of your parents’ house, the purchase of a house or condo may be in order. Additionally, if you need to travel for work or will have a longer commute, a new car may be needed. Items such as these are not only expensive to acquire, they also have to be properly insured. In addition, if you have loved ones who need to be cared for in the event of your passing, it may be a good idea to purchase life insurance. If your income has increased, you may want to adjust any current life insurance coverage or supplement your employer-provided life insurance to fully protect your loved ones. You may also want to obtain disability insurance to help support you and your loved ones if you become disabled. A licensed insurance agent can help you assess your current insurance needs and craft a strategy that will cover all of the important bases.
- An income tax strategy. With a job comes a paycheck, and with a paycheck comes income taxes. If you have recently secured your first job, you may be seeing withholdings for federal and state income taxes, Medicare, and the like for the first time. After the end of the calendar year, you will be required to file your first federal and state income tax returns. An experienced tax advisor can walk you through the process and explain what is involved to help alleviate the negative or apprehensive feelings associated with filing income tax returns. If you have secured a new job, you may be in a different tax bracket. It would be helpful for you to know if there are tax credits or deductions that you are now eligible for or if you should itemize your deductions instead of taking the standard deduction.
There are also basic estate planning documents to discuss. A change in employment can affect your stream of income, purchasing habits, and employee benefit options such as life insurance or retirement plan. All of these changes necessitate a plan to protect you and your accounts and property during your lifetime, through any periods of incapacity, and at your death. If you have not yet created an estate plan, now is the perfect time to craft one. If you have an existing plan, a change in employment is a great catalyst to prompt a review of the plan.
○ Last will and testament. This document, also known as a will, can be used to leave money and property to anyone you choose. A will names an executor or personal representative to wind up your affairs and lists what should happen with your money and property. Your family will have to go through the probate process to receive any money or property that is controlled by the will.
○ Revocable living trust. As an alternative to a will, a revocable living trust allows you to name yourself as the trustee and to designate a co-trustee or alternate trustee if you are unable, for whatever reason, to act as trustee. After creating and funding the trust, you can continue to enjoy the money and property during your lifetime. You can designate within the trust agreement what will happen to the trust’s money and property at your death or upon your incapacity. This option avoids the probate process as long as the trust has been properly funded.
○ 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.
○ Medical power of attorney. A medical power of attorney 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.
○ 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 enumerating your wishes can make them easier to carry out and reduce tensions that can be 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. Providing loved ones with this information can help reduce tensions by allowing everyone access to the same information, even if only one party has the authority to make decisions.
You are entering an exciting new chapter in your life. We are here to assist you in protecting yourself, your loved ones, and your legacy.
Call us at 708-448-5169 to discuss a custom strategy for propelling you to future success.
