A few years back, I found myself in an emergency room, thinking I had a serious condition. As I sat there, I worried about my family, including my wife and young children. But I also worried that if I didn’t come home, my wife wouldn’t have a clear picture of our finances. Fortunately, the health scare turned out to be a false alarm, but it was a wake-up call. Sure, I had an estate plan, but I realized that a binder full of legalese is not enough. There’s a lot more we can do to organize our financial lives so it’s easier on our heirs when the time comes. Below are the organizational principles I recommend:
Financial map: If you’ve prepared an estate plan, that’s great. But don’t stop there. Now put yourself in your family’s shoes. Would they know where to find the original, signed documents? Would they know how to find your attorney and what steps to take first? What I recommend is to write up a simple, one-page summary—what I call a financial map—that will tell your heirs where to find important documents, vendors and other information that I’ll describe below. You could distribute the map on paper or share it with a tool like Google Docs.
Contact list: These days, most people’s contacts are stored on our phones. But even if you could get into someone else’s phone, it might not be of much help. Instead, when someone has died, the most useful thing is a short list of key contacts. This should include your attorney, accountant, financial advisor and insurance agent(s). Immediately after someone has died, these are the most critical contacts. Less urgent but also important: I would include other vendors such as your cable TV provider, cell phone carrier and landlord or condo association, if applicable. Here’s how to think about it: Suppose someone had to pay the most basic bills to keep your home running. Who are those vendors? All those names should go on your financial map.
Balance sheet: Your estate plan spells out who will inherit your assets, but it doesn’t actually say what those assets are or where they can be found. These days, many people hold assets with a mix of banks, brokers and workplace retirement plans. You may also have life insurance policies. And on the liability side, you may have a mortgage or other loans. That’s why I would periodically print out a balance sheet and stow it alongside your estate planning documents. Then, in your financial map, note where these documents can be found. If you write out even the simplest balance sheet, your heirs won’t have to spend time tracking everything down, and won’t have to worry that they’ve missed anything.
Further commentary: In most cases, a simple balance sheet is sufficient. But if you have any unusual holdings—an annuity, a pension or maybe stock options or stock in a private company or in a partnership—you should write up brief descriptions on each. This is a good opportunity to research details that would be particularly relevant to your heirs. Does your pension have a survivor benefit? Do your stock options vest upon death? It’s much easier for you to research these key provisions now than it would be for your heirs.
Assets under the radar: Do you have assets that would be hard to find—a safe deposit box, for example? I’ve seen more than one person hide cash around the house, in books and filing cabinets. Be sure to document any assets like this which may be below the radar. Better yet, purchase a small home safe and let your attorney know the combination.
Easily accessible funds: When someone dies, banks and brokers move quickly to freeze the deceased person’s assets. That’s why you want to be sure to hold at least some assets in a joint account with a spouse or other family member. Alternatively, or in addition, you could hold assets in a revocable trust that includes a co-trustee.
Letters: In addition to your formal estate plan, many people write letters to provide further guidance to guardians, trustees or executors. These letters can articulate some of your more personal wishes—how you would want your children raised or how you would want your personal effects distributed. Suppose, for example, you own a summer home or an antique car or something else of unique value. In one of your letters, you could indicate how you’d like these special assets handled.
Passwords: In the old days, there used to be an easy rule of thumb that if you gathered someone’s mail for a month or two, you could pretty much get up to speed on their financial life and stay current with their bills. But today, so many bills arrive electronically that now you really need to provide heirs with electronic access to your financial life. Otherwise, they’ll struggle to do even the simplest things like pay your electric bill. That’s why I recommend using a password manager. Then provide your master password to your spouse, if you’re married. Alternatively, you could store the master password in your safe, making a note of that on your financial map.
Subscriptions: In the past, I’ve recommended that you use one dedicated credit card for all of your subscription services—Netflix, newspaper, cell phone, etc. This carries several benefits. Among them: It makes it easy for someone else to see a consolidated list of the services you use. Paired with access to your password manager, this would make it easy for your heirs to log into your accounts and decide what to do with each.
Arrangements: If you’ve pre-paid for a funeral and/or a plot, note this on your financial map.
Estate planning is, understandably, not the most enjoyable task. So don’t feel you need to tackle this all at once. I’d start by filling out a financial map, then go from there.