Small and simple things

Steve Merrell |

A recent story in the Sacramento Bee reminded me of the importance of the “small and simple” things when it comes to estate planning. The Bee reported that California’s unclaimed property fund now exceeds $10 billion and that it grew last fiscal year by nearly $1 billion despite the fact that California helped more than $258 million find its rightful home.

Unclaimed property is a mishmash of all sorts of things, including dormant bank accounts, stocks, bonds, never-cashed checks, insurance benefits and safe deposit box contents. Much of this unclaimed property is the result of people dying without heirs or without their heirs knowing the property exists. In other words, a large part of that $10 billion pool is practical estate planning gone bad.

Estate planning is more than minimizing estate taxes for the ultra-rich. Estate planning applies to all who wish to ensure the smooth handoff of their affairs when it is finally their turn to cash in their chips. In fact, some of the most important estate planning steps we can take are often overlooked because they are small and simple.

For example, some families are completely in the dark when it comes to their loved one’s financial situation. You can avoid this problem in your estate by creating a file that family members can access in case of an emergency. The file should contain a list of your various bank and investment accounts, copies of life insurance policies, and the contact information for any attorneys, tax professionals and financial advisors who can help your heirs work through your estate settlement. If you have a safe deposit box, include a key in your file. You should also include PIN numbers and passwords, though keeping them with account information is a clear security risk. If you have pre-arranged your funeral, include that information as well. Finally, make sure you tell your family about the file and where they can find it when needed.

 Insurance policies are a particular concern. Having life insurance can be a boon to your survivors, but creates hardship if they don’t know the policies exist or if they don’t have the information necessary to submit a claim. In the past, insurers would wait until the beneficiaries contacted them. However, in recent years regulators have required insurance companies to proactively search the Social Security Administration’s Death Master File which contains the names of social security number holders who have died as reported to the SSA by funeral homes or loved ones. If an insurer finds a policy has gone unclaimed, they will contact the policy’s beneficiaries. However, this process can take a long time and is fraught with potential problems. It is much better to leave your heirs with the information they will need.

Along with information about bank accounts and insurance policies, you should keep documents showing ownership in real estate, cemetery plots, vehicles, business interests, and brokerage accounts. If you have made loans to others or if you have debts, keep a clear record of those, too. Your heirs will need them to sort things out once you are gone.

How you store your documents is another small and simple thing that deserves more attention than it often gets. You can store documents with your attorney, in a safe-deposit box at the bank, or at home. If you store them at home, make sure you keep them in a fireproof safe. Look for a safe that is UL rated “350-1 hour” or better, meaning it is rated to keep the internal temperature below 350 degrees for at least one hour.

In addition to storing physical documents, it is a good idea to scan your documents and store the digital record securely in cloud-based storage like DropBox or an electronic vault. Check with your financial advisor to see if they provide an electronic vault service. If that isn’t an option for you, a small thumb drive will work, though security could be an issue. If you use a thumb drive, make sure to password-protect your documents. In any case, let your heirs know about the electronic document storage and how to access it.

 

 

Steven C. Merrell  MBA, CFP®, AIF® is a Partner at Monterey Private Wealth, Inc., a Wealth Management Firm in Monterey.   He welcomes questions that you may have concerning investments, taxes, retirement, or estate planning.  Send your questions to: Steve Merrell, 2340 Garden Road Suite 202, Monterey, CA  93940 or email them to smerrell@montereypw.com.