Bruce Helmer and Peg Webb
After you’re gone, everything you own becomes your “estate.” This includes your house, car, possessions (even pets), investments, and savings. You need to plan for how these assets are distributed after you’re gone by creating an estate plan.
It’s also critical that you maintain a secure document that lets loved ones know how to find your important estate-planning documents and financial-account information when they need to.
Today’s article focuses on how to organize and keep track of your financial “stuff.” We’ll start by listing the five essential documents you need to include as part of your planning process, and then offer a few checklist items for keeping track of all your financial information in one location.
Five essential documents
Will: A will lays out who you want to receive your assets when you die and helps ensure that your estate is distributed correctly when the time comes.
Power of Attorney (POA): A POA allows you to designate someone to step in and manage your finances if you are unable to.
Health care Directive: This works much like a POA, with an important difference. A POA is usually created to handle financial decisions, but a health care directive handles medical decisions.
Beneficiary Designations: A beneficiary designation dictates who will receive benefits from certain insurance or retirement accounts after you pass away. It’s important to understand that your beneficiary designations supersede what’s in your will — which means they will inherit those assets no matter who you’ve identified as an heir in your will.
Trusts: A trust is a legal entity created to hold assets on behalf of a beneficiary or beneficiaries. The person setting up the trust can dictate exactly how and when beneficiaries receive the assets in the trust. However, trusts can be expensive or complex to set up and maintain. Be sure to talk with your financial adviser or an estate planning attorney to ensure a trust makes sense before adding one to your estate plan.
Keeping track of your stuff
Over the years we’ve heard many stories of people passing away leaving their spouses or family members completely in the dark about their financial situation. More often than not, it’s because the deceased hadn’t taken the time to organize their estate planning and financial records, and stored them in a centralized, secured location that the spouse knew how to find.
With the start of spring just days away, this is a great time to get your financial house in order. Here are some of our time-tested best tips:
Toss out the pesky and unnecessary financial documents: Most tax returns, bank statements, and receipts are not useful after seven years. File or scan only what you need and toss the rest out securely (shred paper documents or toss them in the burn pile).
Organize the documents you need to keep: If you’re using a file cabinet, organize your files chronologically, so you can find them easily (make sure your file cabinet is in a secure spot that you or loved ones can get to quickly). If you scan documents, be sure to name them appropriately and include the year.
If you’ve stored family heirlooms that you aren’t using, consider gifting them to loved ones while you’re alive.
Consolidate accounts: If you have investment accounts with different custodians, think about moving them to a single account with one custodian. This makes it easier to keep track of your investment dollars and greatly simplifies the estate settlement process for your executor or heirs. While you’re at it, consider closing bank accounts and credit cards that you no longer need.
Document, document, document: We’re big believers in having a single checklist or spreadsheet that tells your spouse or executor how to locate the following:
• Most current will and last testament
• Power of attorney and living will
•Trust documents
• Financial statements (retirement, brokerage, mortgage, home equity, etc., with account numbers)
• Tax returns
• Deeds
• Insurance contracts (Term life, whole life, annuities)
• Contact information for all of your financial advisers
Keep this list in a safety deposit box or encrypted file on your hard drive — and make sure your loved ones know how to access it.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
