Being laid off or offered a volunteer program is emotionally overwhelming. Many people question their self-esteem and have difficulty breaking the news to friends and family.

With all the emotions involved, it can be difficult to focus on the exit negotiations at hand.

This leaves advisors with the role of helping tip the financial scales in the client’s favor and ensuring they begin their job search with a positive outlook. Here is a checklist of items that may need management:

Consider an employment lawyer

The Employment Standards Act specifies what an employee may be entitled to under the law when fired by an employer. What many people don’t realize is that common-law severance packages, which often apply to high-income professionals, can be a different and potentially more lucrative alternative. An attorney can help you navigate nondisclosure agreements and other non-compensation issues. In addition, fees paid to a lawyer are tax deductible.

Mapping the tax implications and costs/benefits of starting offers

Many employees are being asked to choose between salary continuance, where they receive their salary for a period of time or until they find new employment, or a lump sum payment. Another new feature is that the lump sum can be reduced (for example 50 percent of salary maintenance). A financial planner can help determine tax implications as well as the lifespan of the money to help clients decide which decision is best.

It is also important to determine whether health and dental benefits and the employer RRSP match stop once a lump sum is paid. If so, maintaining salary can provide an additional financial benefit that is often overlooked.

Use these benefits

If customers are in a transition period in which their health insurance benefits still apply, they should consider scheduling a doctor or dentist appointment and finalizing payments for glasses and other items while they are still covered. Some of these benefits, such as orthodontics, can be worth thousands of dollars.

Clients should also consider psychotherapy, often covered by allied health care. Job loss can be devastating and talking about their feelings and next steps can help them move on.

Another element of this assistance is career assistance or re-employment advice, which is often a tax-free benefit. For executives or highly specialized workers, the company may provide special help or services to ease the transition to a new role, as these jobs are not as widely available.

Advantages (continued): Conversion into life insurance

Some benefit plans allow clients to convert certain elements of a group plan, such as life insurance, into an individual policy that they can own and keep. This can be convenient for those who have limited coverage or do not qualify for insurance. Additional documentation is often required and clients should seek advice from their advisor.

Plan emergency funds and cash flow management

Clients need to have an idea of ​​how long it will take to find the next job and where to draw funds from in the meantime. This can be a combination of severance pay, Employment Insurance (EI, which only kicks in once severance pay ends), and other savings and investment, such as a tax-free savings account (TFSA), for which there are no tax implications on withdrawals. .

Advisors must ensure that investments match the client’s risk tolerance; the last thing they need is for the value of funds in a non-registered account or TFSA to drop when they need it most.

Consolidate investment accounts

Job loss can be the perfect time to clean up investment accounts. Clients can hold company shares through a purchase plan, stock options that require exercise, or a group RRSP to transfer.

The default option is often to cash out the investments and send the employee a check. This can result in additional taxes and a loss of tax shelter in the case of RRSPs. Sleeping on these decisions is not an option.

Defined benefit pension plans

A company can give an employee the choice of cashing out a pension (called a commuted value) or keeping it and getting that guaranteed payout in retirement.

This is a multi-faceted decision involving thousands (if not hundreds of thousands) of dollars and covering taxes, longevity, investment returns and long-term planning. If the amount is large enough, consider hiring a consulting actuary to get an impartial third-party opinion.

Take a control measure

One of the main sources of happiness for many professionals is the feeling of control over their lives. Job loss – especially when it is sudden – removes this and can leave people feeling lost. Managing which domains can be managed helps customers regain some of that control and stability.

Finally, clients need to know that they are not alone. Many people have experienced a similar situation and clients should be reminded that there is nothing to be ashamed of. Finding peers, loved ones and support groups can go a long way in helping you cope healthily with the situation.

Aravind Sithamparapillai is a partner at Ironwood Wealth Management Group in Fonthill, Ontario.