There will be a day when your life or the life of your family instantly transitions into a new reality due to an unexpected death or incapacity. Unless you’ve gone through this devastating process or helped a grieving family or friend, few people can appreciate the complete sense of being overwhelmed that a surviving spouse or family member will experience upon this life-changing event. “Where is our money…what insurance do we have…how will we pay the bills…what debts and expenses do we have and when are they due…what are the account passwords…how do I get access to the money.” The list goes on and on. This isn’t rocket science, but few people actually take the necessary steps to get their act together and organize their personal financial life.
Let’s face it; no one likes to think about death, let alone our own mortality. People hear the words “estate planning” and instantly check out and move on to another topic. But in my experience, the “estate planning” process is much more than putting a Will or Trust in place. You are actually taking care of your family – which is something you’ve always done. Think of this exercise as the ultimate set of babysitter instructions. Its purpose is to help you get your act together and assemble the most important details of your personal and financial life in an organized and accessible format. Once assembled, this portfolio of information will help your family navigate through any legal or financial process triggered by your incapacity or death.
This estate planning portfolio should function as a repository for your important passwords, legal documents, financial and insurance information along with personal letters and communications you wish to pass to your family. Once completed, you will want to store this portfolio in a safe yet accessible place for your family. Here is an overview of the information I suggest you pull together and organize for your family.
Estate Planning Documents
You should archive all of the essential documents of your estate plan in order to ease the process of transferring your assets to your family in the event of your passing. This section should include your Will and Trust, Durable and Health Care Powers of Attorney and Living Will along with any funeral or pre-arrangement information you may have. Circumstances change in both your life and the lives of your family, so I suggest you review these estate-planning documents annually to determine whether any changes need to be made.
Financial Documents
In this section you should organize a snapshot or overview of your finances. I usually pull together a personal financial statement for my clients that include a description of all their assets and liabilities along with account numbers and contact information. This is also a good opportunity to identify how these assets are titled, any beneficiary designations and whether any of the accounts include a “Payable on Death” (POD) or “Transfer on Death” (TOD) provision. This is a great opportunity to review your “probate assets” and “non-probate assets” to make sure you coordinate how these assets will pass to your family. Once organized, you will want to review and update this information annually.
Personal Information
This section should include personal documents and information you and your family will need quick access to for a variety of circumstances. In this section you can organize essential documents such as social security cards, birth certificates, visa/passports, marriage license, and information regarding any safety deposit box you may have.
I always recommend to my clients that they include personal notes to family members in this section. In the big scheme of things, this is probably the most important section. As difficult as it might be for you to write out a letter to a spouse, child, relative or friend, it is essential to do it and you should not consider this portfolio finished until you have completed this section.
Passwords to Online Accounts
In today’s world, much of your personal and financial data is stored within various online accounts, which require passwords and security-related questions. It is important that your passwords are stored in a secured and safe location. In this section, you can archive all of the important passwords to your web accounts. This section should include passwords to:
- Bank and Other Financial Accounts
- Credit Card Accounts
- Email Accounts
- Social Media Accounts – Facebook, LinkedIn, Twitter etc.
Insurance Information
This is a critical area to assemble immediately and review with your family and insurance professional. You should review what your long-term needs are going to be, along with the needs of your family, and determine if you are adequately covered. I recommend you review this area once a year and adjust coverage depending on changes to your family circumstances.
Monthly Budget/Expenses
Taking the time to pull together a synopsis of your monthly expenses is a little unusual for a traditional estate planning exercise. However, the reality of many families is that some or all of the monthly expenses and cash flow information resides with one spouse. In my family, that responsibility and information happens to reside with me. My wife and I both felt it was extremely important to provide a roadmap to help her navigate through our finances each and every month. An unexpected and continued period of disability or incapacity can be devastating. So, I also include a section that documents the individual’s vision for how their family will continue to “cash flow” the monthly expenses if they are not able to earn an income – describing the disability income and other sources of income that will be available.
Review and Update
Finally, I recommend that you review and update this estate-planning portfolio annually with the assistance of your attorney, financial advisor and insurance professional. Since most people are required to file an annual tax return, I suggest you update this portfolio as part of your tax filing procedure.
