Stephen H. Thompson is an associate planner in the Phoenix office of KeatsConnelly, a cross-border financial planning and wealth management firm. A similar version of this article appeared in the June 2012 issue of the Foreign Service Journal.
Specialized online tools have removed the need to travel with a briefcase crammed with important financial, estate planning and other documents as we go away for the summer or even a short vacation.
Dependable access to financial documents, always important, becomes even more critical in situations like robbery, death, incapacity or illness. Most of us have firsthand knowledge of friends or colleagues who never discuss financial matters with their spouse and then pass away unexpectedly leaving the family without financial records or guidance.
This article identifies some of the key documents which establish the foundation of the financial planning framework for your future and reviews options for maintaining those records in a secure environment where they are not only accessible, but also easy to update.
Types of Records to Keep
Appropriate planning and a small investment of time and money avoid leaving a family worried about the future and in the dark about finances when an unexpected death or incapacity occurs. The first step is to determine which documents are important and then, how long they should be held. The possible list is long and includes the obvious such as annual tax records, numbers of bank and financial accounts, insurance documents, wills, powers of attorney, etc.
Fortunately, various booklets and guides are available to help us separate the essential from what should be shred and tossed. These include IRSPublication 552: Recordkeeping for Individuals. Or consult your team at KeatsConnelly and ask for help in reviewing your records from time to time.
Each person’s situation is different, but key documents include the following:
Estate planning documents. These include wills, trusts, powers of attorney and medical directives. If you do not have them, get them. If you do have them, ensure they are up to date and still relevant to your situation.
Financial accounts. Maintain a list with the name of the firm, contact information and account number. Do not rely on your memory alone. Include banks, credit unions, investment firms, financial planners, retirement plans, and insurance (life, long-term care, medical, auto and property). Fortunately, most financial institutions maintain online statements which are easily accessible, obviating the need to keep paper records.
Final instructions. No one likes to think about their own death and the subsequent arrangements. But leaving guidance for surviving family members or colleagues will save them a great amount of stress. The instructions should also include a list of people to contact in the event of one’s death.
Legal documents. Consider what is important in your situation and include it in your records. You should keep birth certificates, property deeds and titles, death certificates, driver’s licenses, passports, immigration papers, marriage and divorce documents, and military and Veterans Administration records.
Medical records. You may want to keep your own database of medical records and documents. Examples of important documents are lists of current medications, shot cards and past surgeries or treatments.
Miscellaneous. Other items you may wish to keep include appraisals of valuables, Social Security numbers, Tax Identification Numbers, security system codes, pet records, combinations, contact information (for your tax preparer, financial planner, attorney, etc.), and social networking site information.
Tax returns. Keep records of federal, state, and municipal returns for at least three years. Refer to IRS Publication 552 for guidance.
Where to Store Records
The next decision is where and how to keep records. First and foremost, store them well away from your residence. Popular storage choices of physical documents include safe deposit boxes and fireproof safes. However, these have some drawbacks and may not make sense for many people over the long or even medium term.
For instance, some states may restrict or limit access to a safe deposit box upon the death of an owner. Furthermore, in the event of death or incapacity, your executor and others will want, and should have, convenient access to documents.
Electronic storage provides a good solution for those travel frequently or spend the summer in Canada or elsewhere, offering security and access from anywhere at any time. There are many options, some better than others in terms of security and access, so review your options carefully and calculate what the costs are, if any. But no matter which alternative you go with, please advise your spouse, trusted friend or colleague where you have stored these documents. Draw on KeatsConnelly, which offers its clients a secure online vault for client investment reports, estate planning documents, etc.
Several private firms offer secure digital storage for individuals. Docubank charges a monthly fee for digital storage of one’s advance medical directives and other estate planning documents and makes them available on demand anywhere in the world. Individuals and some states utilize the U.S. Living Will Registry, an online site. Other digital storage options include Dropbox.com, Windows Live SkyDrive, and AppleiCloud.
Some states offer repositories for their residents’ advance medical directives either for free, or at a nominal charge. Arizona and California, for example, have such registries.
A relatively new company, Manilla.com, might make sense for those who have to deal with bills while traveling or vacationing for long periods. Firms deliver statements directly online to Manilla.com, where they can be paid and managed. The cost is free and apps make it easy to manage bill-paying on smartphones. Hearst owns Manilla.com, which is highly touted by the New York Times, CNN and Forbes, among others.
The Password Is…
Passwords present another concern, due to their proliferation and increasing complexity. We all recognize the challenge of remembering passwords, but few of us have considered how to make them available to others in the event of incapacity or death.
One simple solution is to assemble a list of passwords and logon IDs and hold it in a secure place. Alternatively, many financial planners maintain online ID and password lists in a secure file for their clients.
For a nominal price, several specialized firms offer storage of passwords and other information so they can be easily obtained from anywhere if forgotten or required by others to manage one’s financial affairs in the event of death or incapacity. Before making information available to beneficiaries, these firms generally use “verifiers” to determine if the client is incapacitated or has died. These firms include Legacy Locker, DataInherit and Planned Departure.
Protect Your Property
Another issue paramount to many of our clients is how to protect household effects in different places, a residence in Florida and a cottage in Canada for example. We never know when we might have to deal with a fire, a pipe break, or robbery.
Some fear the complete loss of household effects through fire or other natural disaster. Fortunately, we can mitigate that risk through appropriate insurance coverage, so long as we have acceptable documentation of what is insured.
KeatsConnelly recommends that clients maintain an inventory of belongings in a safe location outside the home, possibly a safe deposit box or with a trusted friend or family member. Options for taking inventory range from Polaroid pictures and videos of belongings to handwritten lists. Now, however, making the process of listing and recording the property somewhat easier and far more accessible worldwide is software specifically designed for this task. Putting these lists in a secure area on the Web makes them available anywhere, anytime.
Some insurance companies offer inventory software to their customers. The companies generally link policyholders to free software available to anyone such as Know Your Stuff and StuffSafe. Other household inventory services such as DocuHome, Lockboxer, and Quicken Home Inventory Manager charge a fee, which can be monthly or yearly depending on the firm and service provided.
What these firms provide is a secure place to create an inventory of household belongings, photos of them, and documents such as receipts that can be used to substantiate their value. The process can become time-consuming when inputting model and serial numbers, as well as purchase information; however, such details may prove invaluable and worth the effort in the long run. Some software can accommodate belongings in more than one property, an ideal arrangement for multiple residences.
Peace of mind for yourself and others comes from having the appropriate documents, keeping them up to date, putting them in a secure place, and letting someone know where they are. Explore the different options in terms of cost, security, and access to determine the best fit for your situation. But no matter what arrangement works out best, getting started is the most important step to take.