If your family can't find the original trust documents, you are "basically setting your estate up for litigation," says Duncan Moseley, vice president of Sanders Financial Management in Atlanta.
A "letter of instruction" can be a useful supplement to a will, though it doesn't hold legal weight. It is a good way to make sure your executor has the names and contact information of your attorneys, accountants and financial advisers. While the will should be stored with your attorney or in a courthouse, the letter of instruction should be more readily accessible, particularly if it contains instructions on funeral arrangements.
Also, make sure your heirs have access to a durable financial power-of-attorney form. Without it, no one can make financial decisions on your behalf if you are incapacitated.
Proof of ownership
You should keep documentation of housing and land ownership, cemetery plots, vehicles, stock certificates and savings bonds; any partnership or corporate operating agreements; and a list of brokerage and escrow mortgage accounts.
If you don't tell your family that you own such assets, there is a chance they never will find out. Moseley says in such an event, clients must perform their own detective work, watching the mail for real-estate tax bills or combing bank accounts for interest payments, for example.
File any documents that list loans you have made to others, since they could be included as assets in an estate. Similarly, keep a list of any debts you owe to avoid surprising your family. Wills and living trusts generally are drafted to include provisions for how debts should be settled, and creditors have a stipulated period of time in which to file a claim against the estate.
Make the most recent three years of tax returns available, too. "Looking at last year's returns offers a snapshot of what assets we should be looking for this year," says Lesley Moss Mamdouhi, a principal at estate-law firm Oram & Moss in Chevy Chase, Md. This also will help your personal representative file a final income-tax and estate return and, if necessary, a revocable-trust return.
Rick Law recommends sharing a list of all accounts and online log-in information with your family members so they can notify the bank of your death. "If nobody ever takes any more out or puts money in, it becomes a dormant account and then becomes the property of the state," he says.
Be sure to list any safe-deposit boxes you own, register your spouse or child's name with the bank and ask them to sign the registration document so they can have access without securing a court order.
Health care confidential
Possibly the most important health care document to fill out in advance is a durable health care power of attorney form. This allows your designee to make health care decisions on your behalf if you are incapacitated. The document should be compliant with federal health-information privacy laws, so that doctors, hospitals and insurance companies can speak with your designee. You may also need to fill out an Authorization to Release Protected Healthcare Information form.
If you are incapacitated and your family members can't locate a health care power of attorney, they will have to go to court to get a guardian appointed.
Porter Storey, executive vice president of the American Academy of Hospice and Palliative Medicine in Glenview, Ill., says it isn't enough to establish a health care power of attorney unless you have explained to your designee how you would like to be treated in case of incapacity. He also recommends writing a living will detailing your wishes.
Diane Dimond's mother had a series of strokes in 2006, and Dimond knew there was a signed living will tucked away in a safe at home. Dimond, 58 and living in New York, recalls the Sunday she watched her mother in a coma and was able to fulfill her wishes never to be kept on external life support. "It was gut-wrenching," she says, "but I took the physician aside and said, 'I want to take her home.'" Having her mother's living will enabled Dimond to do just that.
The living will and the power of attorney constitute what are called "advance directives"; some states consolidate these into a single form. (AARP offers a state-by-state listing of advance-directive forms on its website.) Terminally ill patients may wish to have their doctors sign a do-not-resuscitate order.
Certain companies, such as Advance Choice's DocuBank, will keep copies of health care documents for a fee. Subscribers get a wallet-sized card, and, in case of an emergency, a hospital will call DocuBank, which will fax over the information.
Life insurance and retirement accounts
Copies of life insurance policies are among the most important documents for your family to have. Family members need to know the name of the carrier, the policy number and the agent associated with the policy.
Be especially careful with life insurance policies granted by an employer upon your retirement, since those are the kind that financial planners most often miss, says David Peterson, CEO of Denver-based Peak Capital Investment Services. New York state alone is holding more than $400 million in life-insurance-related payments that have gone unclaimed since 2000, according to the state comptroller's office.
Estate planners also recommend that you draw up a list of pensions, annuities, individual retirement accounts and 401ks for your spouse and children.
An IRA is considered dormant or unclaimed if no withdrawal has been made by age 70½. According to the National Association of Unclaimed Property Administrators, tens of millions of dollars languish in unclaimed IRAs every year.
If your heirs don't know about these accounts, they won't be able to lay claim to them, and the money could languish. The U.S. Department of Labor estimates that each year tens of thousands of workers fail to claim or roll over $850 million in 401k assets. You can track unclaimed pensions, 401ks and IRAs at Unclaimed.com.
Marriage and divorce
Make sure your spouse knows where you have stored your marriage license. Mary Cay Corr, now 74 and living in Raleigh-Durham, N.C., couldn't locate hers when her husband died. "I had to write to New York, where we got married, and pay for a new marriage license to prove that I had been married to my husband before I could claim anything," she says.
For divorced people, it is important to leave behind the divorce judgment and decree or, if the case was settled without going to court, the stipulation agreement, says Linda Lea Viken, president of the American Academy of Matrimonial Lawyers in Chicago. These documents lay out child support, alimony and property settlements, and also may list the division of investment and retirement accounts.
Include the distribution sheet listing bank account numbers that accompanied the settlement, to avoid disputes about ownership or payments due. Also include a copy of the most recent child-support payment order. In most states, the obligation to pay child support still exists after death.
Viken also recommends filing copies of any life insurance papers. In many states, if you have a policy that benefits your children, it can be set off against the ongoing child support.
You also should include a copy of the "qualified domestic relations order," which can prove your spouse received a share of your retirement accounts.
This article was reported by Saabira Chaudhuri and Mary Pilon for The Wall Street Journal.
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Thanks for the article. It reminded me to check with the Neptune Society to verify that my policy is still in effect and good.
Nothing torques my jaws more than watching and listening to those vultures at the funeral and burial businesses try to con and conjure every dollar possible out the relatives when there is a dead body to dispose of.
My solution was a Neptune Society cremation policy, which cost me $400 years ago and is still there waiting for the inevitable. My sister and I did a pre-paid funeral and burial plan for my mother, too.
Just be sure you buy from a business that will still be there when you aren't.
All of this is great advice with one omission and one exception. First the exception - the fire proof safe - they are not worth the money unless they are first class units - NOT the
Wal-China brand. Those safes are rated for 30 min. For a quick fire who knows, but for a devastating fire where lives are lost? The safe will make it, but not the contents - happened with my Dad and I know of others. Get a bank box at your bank - lots of banks give them for free if you are a member.
The omission is electronic passwords and pins. Obviously your executor is trustworthy, or simply write them down and put them in the Bank Box. You would be supprised what may be needed from emails.
In addition to the documents in this article, my estate management file includes information for all my key service provider accounts, e.g., utilities, phone and cable, home, auto, and health insurance, landscapers, property tax authorities, property owners associations, membership clubs, etc. There’s a lot more for an executor to manage than just financial accounts while settling and distributing an estate. The stuff the lawyers and financial managers charge you for is the easy part.
I was the executor of my mother's estate. I "assumed" her life insurance policies were in order. When she passed we found out the beneficiaries were my brother & grandmother who had both been deceased more than 2 years. I had to prove I was related to both of them before getting the "pay out".
Her 2nd life insurance policy named her sister & I know my mother would rather her kids have gotten the $$ but when she took out the policy they were all underage. She never updated that one either. We lost out on $25,000 while her sister laughed all the way to the bank. The sister who I quote "I conducted all my business over the phone w/your mother". And while my mother lay dying in the hospital she came to see her only if she had errands to run in town. NICE!
Lost both of my parents, unfortunately my mother had nothing in place, so at my brothers urging my father set everything up with an attorney--in addition, all bank accounts and investments had TOD's (transfer on death) attachments. When my father passed it saved us a lot of time & trouble--everything I have is now set up the same even though I do not have a will (still need to do it : ( ) Edward Jones is the company my parents had and they have been the BEST! Still work with the same advisor even though I live in a different state... Best to all that have to go through this. Hard enough to deal with the loss and then fight the state!
Spoken like a true insurance salesman. Every change is an opportunity to sell more insurance.
I bet you like selling any kind of policy instead of term life.
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