Don’t do this to be ghoulish or to make yourself feel appreciated while you’re still alive. Do it because, like most families, you probably have a division of labor in your household. And if it’s your job to handle investments, file tax returns, pay bills and keep the financial records, think of how those chores would be handled if you were suddenly not around to take care of them yourself.
Most consumers feel a will can adequately assist them if they are placed in a situation of suddenly managing personal and/or household finances. While it might be helpful to determine how assets are to be divided, there is information you may need that is never mentioned in a will. For example, is there a life insurance policy, and who are the beneficiaries? Where is the deed to the house? How much have specific assets increased in value since they were acquired?
So if you are the main accountant in your household, take a few minutes to draft a document that highlights anything your family would need to know about money and investments if you were not there to tell them.
Start with the easy stuff. Write down where you keep your will or trust and whether the lawyer who drafted it maintains a copy, along with his/her name and address. That’s probably the first piece of paper everyone will look for.
List all the bills you pay each month and whether you pay them by check, online or have them deducted automatically from a bank account. If electronic bills are sent to your e-mail address only, make note of it; people will need to look there until they can have the bills directed elsewhere. The same goes with your home loan, if you have one. Your family will need to know how to keep up the payments and whether you have been paying property tax directly or it is collected with your mortgage payment.
Where do you keep important papers, like the deed to your house and the title to your car? If you have a safe deposit box, let people know where it is located – and where you keep the key! If you can, direct family members to other important papers — bills showing improvements you’ve made to your property, old tax returns, etc. Remember, the IRS has three years to audit a tax return, and it’s always possible you won’t be here to explain that deduction for home office furniture you took two years ago.
Make a list of all of your family’s investments — bank and brokerage accounts, CDs, 401(k)s, IRAs, everything. Include where you keep statements for each so someone can easily find the account numbers and balances.
If you have life insurance, write down the name of the company it is with, where the policy can be found, and its value. If the beneficiaries aren’t obvious, this is a good opportunity to identify them so there is no confusion. Provide as much information as possible about other insurance you have — auto and home policies, health insurance, even service contracts for major appliances.
Finally, if you’re the only one who knows the passwords to your online accounts — the ones for your banks, brokerage, or utilities — let people know where they can find them. You don’t need to include the actual passwords on your document; you can just point them in the right direction. You can even do so cryptically to protect against the passwords falling into the wrong hands. For instance, “The passwords is the month of our daughter’s birthday and the day of our son’s birthday.” Then follow up to ensure your family knows what you’re talking about. If you’re really concerned about privacy, there are programs available that will encrypt your passwords so you can safely store them on your computer.
When you’re all done, hand a copy of the document to someone you trust, preferably a family member. Once a year, look it over to see whether anything has changed.
With any luck, you’ll need to update it dozens of times.