I was saddened to learn of the death of Apple Inc. co-founder and chairman, Steve Jobs, last week. Whether or not you are a user of Apple products, surely you can appreciate the contribution Mr. Jobs made to global technology.
The Legacy We Leave Behind
While Mr. Jobs' passing was on my mind, I wondered about his restricted stock holdings and how his massive empire would be transitioned to his intended heirs. I realized that this was a good reminder about estate planning. No one likes to talk about death, but since immortality is not a clause that exists in stock plan (or any other) agreements, planning for the inevitable is a wise step. I'd prefer to have my descendants reflect on the positive impact I had on their lives, rather than the way I bungled their inheritance!
Does Designating a Beneficiary Help?
There are varied opinions about whether beneficiaries should be designated for stock plan grants and awards, such as stock options or restricted stock. Maintenance of such designations and the fact that generic beneficiary forms can be problematic due to varied local estate regulations are some of the core arguments against the use of such forms. See Robyn's 2009 blog on this topic. The issues with designating beneficiaries have taken center stage in recent court cases. In January of 2009, the U.S. Supreme Court ruled, in the case of Kennedy, executrix of the Estate of Kennedy v. Plan Administrator for DuPont Savings and Investment Plan et al, that a deceased man's pension plan was to be paid to his ex-wife, based on a 27 year old beneficiary designation that the man filled out shortly after his marriage. Even though their divorce decree years later had divested her rights to his pension plan, he never changed the beneficiary with the plan administrator. This failure to change the beneficiary designation resulted in what appears to be an unintended payment to his ex-spouse rather than to his estate. I think many would agree it's reasonable to assume that was probably not the outcome he'd had in mind in crafting his estate plan.
I'm guessing that Steve Jobs had a solid estate plan in place. He certainly had the benefit of having enough resources to engage top advisers to assist him in this area. In general, the loss of another often prompts us to evaluate our own mortality. As individuals, it's a timely reminder to have our ducks in a row, and to periodically assess the plan to ensure our instructions reflect our most current intentions. Has there been a change in the family (marriage, divorce, death or birth) that would impact prior designations? As plan administrators, it's also an opportunity to nudge our employee populations about doing the same, with a reminder about how the company will handle such a situation administratively and what documentation may be required. An unpleasant topic? Yes. Yet we should be talking about it, because it's an area where informed planning can make a world of difference. Year-end is just around the corner. In preparing the related employee communications, consider including a reference to estate planning. We send out about reminders about much more routine things such as to set our clocks back an hour, or that the social security tax withholding accumulator resets on January 1st. Why not include some important information on how they can manage their estate planning in line with company policy? You may also want to visit the session at the 19th Annual NASPP Conference on Death, Taxes and Senior Executives: Estate Planning and Retirement Programs.
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