We hear all the time about the importance of proper estate planning, particularly in terms of the basics, like wills and trusts, which can go a long way to making life easier for your heirs and loved ones when you die. The purpose of these mechanisms is principally to ensure the seamless transition of your property to your heirs at the event of your death, and passing on without the benefit of proper estate planning structures in place can be a nightmare for those left behind (and about whom you supposedly care so much). Dying without a will can have especially significant ramifications for those with minor children, as the court will have to make a decision about in whose care they’re placed, a decision with which you might well disagree…if you could.
In this article, however, we want to focus less on the matter of wills and trusts, per se, and on something else that is just as important as proper estate planning – the matter of your heirs’ access to all of that good information you’ve worked so hard to assemble.
Even if you have a solid will, if you died today, would your loved ones know how to access it? Do you know where it is? It is hardly uncommon for someone to have done all of the right things, and then neglect to tell anyone else where the relevant information required to properly negotiate the legal and financial details associated with one’s passing can be found. While many take the position that heirs should have no foreknowledge about what is waiting for them when they (the prospective decedents) die, you obviously want your heirs to be able to settle your estate appropriately at the point of your demise; if you’ve not told a soul anything regarding the whereabouts of all that will be needed, the efficacy of that process may be seriously compromised.
There is a variety of ways that these issues can be handled, but one of the simplest is to create an informal piece of instruction that lists all that you have, and where the documents related to your assets can be found. If you’re old-fashioned, you can write it out long-hand and make copies for your heirs, but if you’re computer-savvy, a Microsoft Word document that can be emailed to all heirs (and printed out, as well) is even better.
Something else to remember for inclusion in such a document, in this day and age, are the usernames and passwords for everything you have that is either entirely online, or can be accessed online as an option. This should also include any security prompts that you’ve set up for any of these accounts, including any verbal passwords you have in place if you make telephone calls to the company (not at all uncommon with securities brokerages and custodians).
This is a particularly important matter if your family dynamic is such that there is just one remaining parent (either through death or divorce) in a household, and the children are grown and spread out in different locations around the country or the world. This is by no means an uncommon situation, and the nature of such family configurations means that it is likely the children will have not the foggiest idea where to turn at the time of a parent’s passing to find what they’ll need; because they have been so far removed from the daily goings-on of that parent, there is no opportunity for them to even indirectly gather information about where documents are, or who valued advisors are. Horror stories abound of heirs missing out on life insurance policies and other beneficial financial mechanisms in place because they had no occasion to know of their existence, in part because the heirs and the parent were simply not together enough to have a chance at that conversation.
Speaking of valued advisors, these are additional resources that should be accounted for in any written document that is designed to provide direction. While it is essential that, at a minimum, the whereabouts of accounts, policies, locations, lock keys and combinations, etc., are properly indicated and passed along to children and other heirs, it is also almost as essential that one’s lawyer, accountant, financial advisor, insurance agent, and any other professional advisor is noted in the same resource. Although it is possible to put things to bed, so to speak, by starting fresh with new advisors, things will be much easier for those left behind if the pros who’ve long been intimately familiar with your tax returns, estate plans, brokerage accounts, and insurance policies are the ones to whom your heirs can turn. As a matter of fact, it is a good idea to set aside some time to formally introduce your heirs to these professionals, so that they will already have a personal relationship, of sorts, by the time of your passing.
In the end, it’s not enough to have done all of the right things as far as wills, trusts, insurance policies, IRAs, and prepaid burial plans go; you have to be sure those left behind know where to find the relevant information, as well as all they’ll need to access it; as it turns out, this is one of those rare cases where doing the right thing doesn’t matter if no one knows about it.
The information contained here is for general information purposes only. The Financial Writer blog and Bob Yetman disclaim responsibility for any liability or loss incurred as a consequence of the use or application, either directly or indirectly, of any information presented herein. Nothing contained in this article, or any other article featured at this blog, should be construed as a solicitation or recommendation to engage in any financial transaction. You should seek the advice of a qualified professional before making any changes to your personal financial profile.