How and why to put your legal and financial affairs on autopilot
If Something Happens to You
by Michael L. O'Brien
13 Things to Teach Your Children
Choosing a Legal Guardian for Your Child
Sharon Waldrop, a mother of four from Highland, California, has managed her family's finances for the past 12 years. Her husband has no interest in family finances and bill paying. "His financial skills are far from superior," Waldrop says. "I'm good with numbers and I enjoy the challenge. My husband doesn't even know who we pay our mortgage to each month, or who carries our automobile insurance. He would have to do some investigating to figure this out, and I have all the resources available and easily accessible."
Planning for the incapacitation or untimely death of a spouse means taking steps today to put your legal and financial affairs on autopilot. A surviving spouse shouldn't be forced to make critical decisions in a time of grief and loss. "If one spouse handles everything, it leaves the other person completely in the dark concerning what the family has, where everything is located and what advisors to talk to about it all," says financial planner Joseph Hearn. Hearn and attorney Niel Nielsen, both based in Omaha, Nebraska, are co-authors of If Something Happens to Me (IfSomethingHappensToMe.com). The workbook and document organizer allows families to arrange financial, legal and insurance information and provides step-by-step guidance on what to do after losing a loved one.
In many families, one spouse may handle bill paying, while the other tackles insurance. Compartmentalizing of tasks can put a family at risk. A surviving spouse will inherit responsibility for managing everything, resulting in confusion and added stress. Some spouses will be left in a precarious financial or legal situation.
Key documents are needed during difficult moments. Unfortunately, people don't focus on organizing them. Some papers may be in their safe deposit box. Others may be scattered about, shoved in a drawer, stored at the office or thrown away.
How do you plan for the unthinkable? First, meet with advisors and prepare or obtain documents like a will, powers of attorney and life insurance. If you and your spouse were to die simultaneously, for instance, not having your affairs organized could result in confusion over the care of your children. If parents die without a will, a court will appoint your child's guardian, not necessarily in line with your intentions.
Know where your papers are and their purpose. File essential documents in separate folders. Label each folder and place them in alphabetical order in a file cabinet or storage box.
Locate applicable data, listed below, and insert in separate folders:
- Identification numbers, including social security, military service, drivers license and health insurance for you and your spouse; your children's social security (if minors)
- Tax returns
- Current will, living will, trusts and amendments, durable powers of attorney for finance and health care
- Military discharge papers
- Insurance policies
- Inventory of home contents
- Birth certificates and/or related data for family members and dependents
- Marriage license
- Current statements from assets and liabilities, including annuity, bank, brokerage, education savings accounts, IRAs, mutual funds, credit cards, loans, mortgages, and stock certificates and savings bonds
- Pension and retirement plans
- Other assets, such as vehicles
- Closing/escrow papers for purchased real estate
- Documents for ownership of a business
- Usernames/passwords on accounts and computer files
- Divorce Judgment or decree from a prior divorce
- Contact information of current accountant, attorney, financial planner, insurance agent and other advisors
- Pre-planned funeral arrangements, such as cemetery lots and burial intentions
- Contact information to inform friends and acquaintances
- Employer information
"Aim for consistency and predictability as you label each folder," says Julie Calligaro, an estate planning and probate attorney in Taylor, Michigan and author of "The Resource For Widows" (widowsresource.com). Calligaro's book deals with the challenges that occur after a spouse's death, such as applying for benefits, organizing and managing finances, taxes, and probate.
Be diligent: Revise an inventory of your assets and liabilities, attach to a trust or will, and update as changes occur. Inform a trusted family member of the location of your safe place, and ensure that a trusted person can access the documents at your disability or death. Otherwise, you'll force your trustee or representative to determine what your assets are and possibly overlook some.
Store your computer-based records in a safe place, and prepare instructions for your loved ones to access them. "A detailed computer file will be useless if your family doesn't know it exists or knows it exists but can't find it," Calligaro says.
What should you keep in a safe deposit box? "As a general rule, we tell people not to keep anything in their safe deposit box that they may need in an emergency, such as a power of attorney," says Nielsen. "The safe deposit box of a deceased person is often sealed at the time of death. Avoid keeping items in your box that heirs or personal representatives may need immediately." Here's a list of items to store in a safe deposit box.
- Originals of birth, marriage and death certificates
- Adoption papers
- Citizenship and military service records
- Vehicle titles
- Real estate deeds
- Mortgage paperwork
- Stock and bond certificates
- Certificates of deposit
- Precious metals
- Valuable collectibles
- Photographs, video and/or a written inventory of your home's contents
- Will or estate plan (Keep a copy here, but make sure to have a copy elsewhere.)
- Life insurance (Instead, leave a list of your policies.)
- Medical or financial powers of attorney
- Burial instructions
- Cemetery deeds
- Funeral arrangements
- Property owned by others
The consequences of not having your affairs in order can be dire. Calligaro has seen surviving spouses faced with:
- Not knowing whether or not they have sufficient money to live on. They may live in fear and austerity or, alternatively, overspend in ignorance.
- Having no idea what assets they have; some may go unclaimed.
- Vulnerability to unscrupulous financial planners, real estate agents, attorneys, family members or friends.
- Pressure to make decisions about the deceased spouse's business sooner than necessary or prudent.
- Estate taxes that could have been avoided.
"Attorneys, accountants and financial advisors charge thousands of dollars to organize estates," Hearn says. "Pain, stress, aggravation, family quarrels, lost time and wasted money that result from poor planning and organization can multiply that sorrow. Having your legal and financial affairs organized not only helps others in the event of your death, but it becomes a resource during your life."
Take the Next Step:
- Print this list and start gathering the paperwork together.
- Use the Three Simple Filing Guidelines to help you in getting that paperwork organized.
- Read what our reader have to say about Keeping Your Papers Organized.
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