Preparing Your Information for Disaster, Part Two

About a year ago, I wrote an article entitled Preparing Your Information for Disaster, in which I discussed the challenges my mother (and I, in a peripheral way) had in organizing the accounts and papers of my maternal grandmother after she passed away.

The article is really thorough and I consider it to be one of the most essential things I’ve ever written for The Simple Dollar. Simply put, if you have someone you’re going to leave behind, you need to prepare a document to help them figure out the mess of your accounts.

So why am I touching on this topic again? Well, because the issue has come up again in my life.

For the last year or so, I’ve served on the investment committee of my local church. Much of the money that is donated to our church is passed on to other charities, like the local food pantry and ELCA World Hunger and such things – sometimes even directly in the pocket of people in the community who are struggling to keep food on the table for their kids. I’m extremely proud of the charitable giving that we do – in fact, the charitable giving of my church in the local community and in the broader global community is the biggest reason why I’m an active member.

Anyway, we do retain some of the money for things like helping members of the church attend seminary, pay for building repairs (and eventual building replacements), and so on. I also find these things important, again, because they support the community – weddings are hosted there, people freely congregate there, and so on.

Of course, with money in the bank, someone has to be in charge of investment decisions. Our church has a three person volunteer investment committee in place, with a chair that does most of the footwork and the other two largely contributing on the decision-making process. Given that I write The Simple Dollar, it’s probably no surprise to anyone that I’m on this committee.

The chairman of the committee for many years passed away very recently, leaving a big vacancy in terms of who would actually handle the footwork of preparing reports and so on. I chose to volunteer for this, believing that I could easily pick up the reins and run with it.

What I found was that taking over the reins was a lot harder than I had ever anticipated. I’ve spent lots of hours already piecing through the papers and the statements, attempting to clearly discern where things should be and which account is intended for which purpose.

All of the pieces are there (aside from a few small arithmetic errors), but it’s akin to popping open a 1,000 piece jigsaw puzzle with all of the pieces loose in the box. It takes some serious work to assemble them into a clear picture.

Which brings me to my point.

All of us are responsible for our own finances. Some of us are responsible for the finances of others, either through volunteer work (check), parenting (check), or guardianship (thankfully, no check).

What happens when you’re no longer capable of managing those finances? Usually, someone has to come in, figure out everything from whatever you’ve left behind, and still often miss some things. A lot of time and effort and energy is wasted simply trying to figure out what was in your head after you can no longer reveal it.

The solution is simple: document it.

My previous article outlined an extremely thorough document that you can prepare to make sure everything is easily accessible. Honestly, though, most people won’t put in the effort to do that, though it will make things much, much easier for those they leave behind if they do.

Instead, I propose leaving behind a single page of explanation for each relevant person you’re going to leave behind.

You’re leaving behind a spouse? Prepare a page or two explaining everything she needs to know.

You’re leaving behind kids? Prepare a page telling them everything that’s important and relevant to them.

You’re leaving behind fiduciary responsibility? Assemble a page explaining the accounts, who to contact about the accounts, and what they’re all for.

It doesn’t have to be endlessly thorough (though the more thorough and well-organized it is, the easier it will be for those you leave behind to pick up the reins). It just needs to have enough information so that the people you leave behind aren’t completely lost, aren’t missing responsibilities that might hurt them if left untended, and aren’t failing to claim the resources you’ve left behind for them.

Make it clear. It only takes a few hours and it’ll save a lot of heartache down the road.

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  1. Ana says:

    Trent, honey, you have to stop churning out so many articles! Rest on the weekends at least. You have spoiled a lot of people by doing this. Be with your babies and wife. Even if writing is compulsion for you. Save the posts for a ” Rainy day”. My head is spinning with so many articles posted. I can barely focus on one then bam! Another is out.

    All the best
    Ana

  2. Wesley says:

    My biggest thing was setting up a Password Safe http://passwordsafe.sourceforge.net/ that has all of my passwords in it. With so much of my financial work done online it is crucial that anybody who needs to take care of things for me have these passwords. Now there is simply a password protecting the password safe that several people know (fiancee, parents, sister) that way if anything happens they have access to everything.

  3. Mandy says:

    A great reminder! I had a friend who was a young widow who actually taught a class for the women in our church on this very topic. We now have a binder that I call “Our Life on Paper” that we keep in the fire safe. It has been immensely helpful even for keeping track of passwords we don’t use very often (like for ordering college transcripts) as well as for the “big” stuff.

    Thanks!

  4. margaret says:

    This is so true, especially in organizaions where one person has had a role for many, many years. Last year, I became the treasurer for a minor sports association. It was a lot to learn, and I still have to get through this registration period to have done the full cycle. I would be happy to remain treasurer the entire time my kids are involved in this sport, but it is always a problem when only one person knows what to do. So this year, I will start documenting the position so that if someone had to take over with no one to help, they could. Ideally, over the years, I can alternate with at least one other person, but it doesn’t seem likely that is going to happen. The previous treasurer was a great help to me, but she was also very busy, and at times, she simply could not come to my aid. Documentation would have been very useful.

    I am also the treasurer of another organization with a slightly different problem. I became secretary/treasurer 14 months ago. The previous secretary/treasurer has STILL not handed over any of her books or minutes. This past year, she basically did all the forms etc. I did not have the information needed to complete them, so I would ask her for information, she would ask to see the form, and then the next day she would tell me that she just filled it in and sent it for me. I think she is pretending to herself that she is training me in the position, but really, she is a control freak and she is absolutely convinced that I am incompetent to do this position. In a way it is funny, because this is a mickey mouse position that I consider the kind of position you take on the first time you are ever treasurer, as it is fairly easy. It is also maddening, though, because this is NOT my first time being treasurer, and I can only take so much “you won’t be able to understand this, but…” (fyi I have three bachelor degrees, my own company, a family, a farm, and I’m nearly 40. This woman phoned me to explain HOW TO MAKE A BILL PAYMENT!!!). Fortunately, she gave me photocopies of everything she did this year, so next year I can work from those. I still do not get how she thinks working from the photocopies next year will be so much easier than working from the photocopies this year would have been. Anyway, my point is that not only can someone die and leave a group in the lurch, someone can leave the group in unpleasant circumstances where they are unwilling to provide any information.

    Personally, I always write out something explaining everything I can think of about a position for the next person. I figure if they still have questions after that, I did not explain well enough.

  5. Thanks for a great reminder. My grandfather was obsessed with the family knowing the location and details inside his “little black book” (as he jokingly called it) that contained his financial info. When he felt that his children had a good understanding of the legacy he would leave them, he passed away peacefully. And his notebook was immensely helpful in settling his affairs.

    I must admit that I haven’t been as diligent about doing the same for my family, so this post is a good reminder.

  6. When you say “simple” dollar, you’re not kidding! Your affairs must be elegantly streamlined.

    How on earth would most of us get all the information relevant to bank and investment accounts, real estate investments, income sources, recurring bills due, legal and accounting information and advisors, tax matters, insurance policies, Social Security benefits, child guardianship, pet care, key website passwords, living will, powers of attorney, final wishes, and all the rest of it on one or two pages? I can’t even imagine.

  7. Julia says:

    Great post Trent!
    This goes beyond finances too.
    When I was in high school I was part of a program that helped me get a job then supplemented the on-the-job learning with class time. The year-end assignment was a job description manual. The idea was to create a manual that would help the next person that takes over my job.
    That exercise set a precedence for me. Everytime I plan to leave a job the first thing I do (even before I find another job) is evaluate all of my duties in terms of how difficult it will be for somebody else to take over. Then I start writing instructions for any task that is not self explanatory, starting with tasks that nobody else works on.
    The last job I left was an internship that seems to get a new person every year. I was the first intern to ever write a job manual for that position. My old boss was/is a client of the firm that I moved on to. Everytime he gets a new intern he thanks me for writing that job manual.

  8. SMG says:

    Very relevant post…you cant stress enough the importance of documenting your finances.

  9. Actually, I put together a notebook filled with all of the financial account and management stuff for the family. I handle EVERYTHING, so it’s very detailed with log in info etc. But… it took a long time to put together. I just hope if my hubby or daughter ever need it, they will remember where it is!

  10. J. O. says:

    Super advice.

  11. Barbara says:

    Excellent advice about financial documentation, however in my opinion this should not be done in order to prepare the spouse for your death. Spouses should already be sharing all these details from day one of the marriage. The couple’s financial state is something both should be intimately involved with all along. The idea that the husband dies leaving the wife with no clue is appalling (but unfortunately quite common apparently). Keep up the good work Trent!

  12. margaret says:

    re # 8: If I died, my husband would have no clue, but that is because he is completely uninterested. However, my mom and accountant could step in and figure everything out. When my kids are older — maybe late teens — I will start getting them up to speed on family finances.

  13. Brent says:

    I don’t have a spouse, kids or an organization I’m responsible for, but I’ve wondered about whether it is worth it to do some exhaustive documentation. Being that nobody depends on the assets or accounts and they change relatively frequently, it should get all straightened out eventually. On the other hand I would like for as much as possible go to my actual family rather than the probate process. What is the cutoff on when this starts making sense?

  14. Lisa says:

    I’ve been thinking about this recently too (J.D. had an article in get rich slowly a couple weeks ago). But like Brent (#10) I don’t have any dependants (I’m only 27). Other than having the beneficiary set up for my 401k I haven’t done any planning. I do have assets I like to make sure get passed along easily, but documenting all the account info and passwords in one locations seems like a risk too. Is a safety deposit box necessary? Is keeping a paper document in the house somewhere sufficient? Even then I’m not sure how easy it would be for my family as everyone lives out of state – should I send someone a copy?

  15. nickyt says:

    Such a great article!! Another line of thought is that this is not important for after we die or pass on a position, but for the present if we are caregiving for a loved one and incapacitated.

    I work for the Alzheimer’s Association. Caregivers often think they have everything covered for their loved on with Alzheimer’s. When I ask them “What would happen to your loved one if something happened to you?” it makes them stop and think.

    I recommend a “short version” that is readily available on the Kitchen Counter in addition to your longer version. This is for the person who has to begin caregiving for the loved one. For every person in the house it should include full medical histories, curent medication lists, current physician lists, emergency contacts, and a list of the daily schedule, activities, and “go-to” meals. This can be easily grabbed by the primary caregiver, outside caregivers, babysitters, neighbors or emergency personnel. It’s just a “grown up” version of the list we gave the babysitter when our kids were younger.

  16. Christy says:

    Getting things down in writing and telling someone in the family where things are and what to do is very important.
    When my parents died they owned 1200 acres of farm land and a mountain of bills. I finally just grabbed all the bills and started sorting them in piles. We then called everyone to find out the latest amount owed. We apprently missed some that came out of the wood work when we probated the will. Long story short, after 7 very long exhausting years and $50,000 to a lawyer, and selling off everything but 160 acres, my brother and I finally got the estate settled. We heard for years, “When we die everything will be taken care of and you kids will just have to split the land.” Boy were they wrong. If it wasn’t for a mishap on the life insurance company that my parents and I had, I would never had known they had life insurance with my company. And then they didn’t have any benificiaries listed, so it went to the estate and we had to probate that out, we paid the mortuary a year after my fathers death.
    Get it in writing. I have a book with all my accounts listed and where, I even have my obituary written and my burial plots bought. You can never be too prepared, death comes suddenly and you can’t ask questions. I tell my son all the time, when we die instantly go to the safe deposit box, your instructions are in the box and his name is on the list so he won’t have any problems getting in the box.

  17. Dave Ramsey calls it something like the love drawer, because you are giving your family the GIFT of organization. A grieving spouse shouldn’t have to dig through bank statements two days after her husband dies…I see this all the time as a bank account rep, and it is so sad! That is the last thing she should have to do. So…

    Take the time, get it organized, get it together! You never know when your number is up.

    It is such a wonderful gift to your family to open up a drawer or a binder that has EVERYTHING spelled out…where it is, how much it is, who the bene’s are, who your bank contact person is, who your lawyer/accountant is, where the safe deposit box keys are, etc. etc. etc.
    I’ve helped people in situations where everything is clear and easy, and I’ve had people calling me asking “Did my deceased mother have accounts at your bank? I’m not sure…”
    Clean out a drawer or a file and just do it. It is totally worth the time.

  18. Valerie says:

    When my stepfather (ok my mom’s live in boyfriend of 20 years, never married) passed away several years ago, she thought everything was in order. The house and vehicles were in both their names with right of survivorship and she had the living will and medical power of attorney. However, his bank accounts, insurance, military retirement, social security, and other documents were a mess. It took over a year for his estate to finally be settled.

    My grandmother had alzheimers and by the time she was diagnosed all 4 of her kids were arguing over her care because no one had medical power of attorney.

    Two personal examples of why it is important to pull everything together and keep them in a fire safe or safe deposit box. Be sure to give copies to the executors. Remember to update your documents as your life situation changes (new baby, kids out of college, divorce, retirement, etc).

    Consider adding a second signer on your bank accounts and credit cards (it can take weeks for banks to release funds otherwise).

    Some of the documents to consider: will, living trust, power of attorney, living will, medical power of attorney, insurance, social security, medicare, military discharge papers, bank accounts, credit cards, online passwords, prepaid funeral expenses, obituary. Your death will be emotional enough, leave your survivors the gift of peace of mind.

  19. Cheap Texan says:

    @#8
    My husband and I both have complete awareness of all this, but I am the primary financial person. I pay all the bills, move money into different accounts…He KNOWS all of this, but he would be a little at a loss if something happened to me and he had to take care of it all.

  20. Sandy says:

    I heard a great interview yesterday on NPR about how leaving your computer life behind properly is getting to be a big issue after, after you die. So much is online now…for some, every part of them is online, rather than on paper. Facebook, Twitter, Second Life…who is responsible for your pages after you’re gone? You may want to include all of that in your GIFT of organization file.

  21. Victoria says:

    This organizational tool would also come in handy if your home were destroyed. If you don’t have a safe deposit box to keep a copy in, get a fireproof safe or send a copy to a trusted friend/relative to keep sealed until you need it.

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