6 Quick Steps to Get Your Accounts Organized

Organizing your finances

Do you know the ins and outs of your financial accounts? I didn’t for a long time!

About two months before Steve died, I looked at him working at our kitchen table and stated, “if anything ever happened to you, I wouldn’t know where to start.” Instead of putting it off until later, he had me come with him and showed me right then how to access our finances on his computer.

He simply opened a folder, which all of our financial information was in. I figured that was good enough and went back to what I was doing. If only I knew then what I know now…

A Preview Was Not Good Enough

Fast forward to a few days after the accident. I remembered that conversation. I remembered where the folder was. I found all of our information.

The problem? It wasn’t good enough. I didn’t have enough information to act. Figuring things out was like a full-time job – when I was barely qualified to get through each day. Instead, every day I would have a plan of places to call or go to and hope to find answers. Don’t let this happen to your loved ones!

Here are six quick and simple steps that you can take this weekend to get your finances organized. Don’t forget to share them with your significant other – better yet, do this together!

1. Start a Spreadsheet

Use Excel (or another program) to make a list of all of your accounts. Include checking, savings, retirement, life insurance, loans, investments, basically everything. Locate statements, so you have full details available to complete the rest of the steps below.

2. Add Contact Info.

List contact information for each account. This may be the local bank, a financial advisor or just a customer service phone number. Make sure to list something.

3. Add Beneficiaries

List your beneficiaries for every account. Read my horror story about having incorrect beneficiaries if you need additional motivation!

Some accounts should be Payable On Death (POD) in the event that funds are needed immediately to cover costs (think the accounts at your local bank). The rest should be listed to beneficiaries or to a trust.

Many accounts do not force you to name a beneficiary – do it anyway! This avoids probate. Keeping the list handy makes it easy to review on a routine basis.

4. Add Account Numbers and Balances

Consider listing account numbers and dollar amounts for any accounts with a loan or asset balance. You should keep this information confidential with the exception of the executor of your estate or financial advisor.

Doing this will make any follow up phone calls so much easier. It’s also important when you’re trying to make changes, such as consolidating accounts.

5. Make It Accessible to the Right People

Store this information where your executor can get to it. If you have it in a safe deposit box, make sure they are a signor. I have a copy on my computer and my parents have a copy since they are now the executors of my estate.

6. Review, Review, Review

Make a plan to review your information. Keep a copy handy for a quick review. I review it annually on the anniversary of Steve’s death. I will never forget to review my information!

Do It – Before It’s Too Late

Get started by gathering all of your financial statements. Make a date (this weekend) with your significant other (if you have one) and start a spreadsheet. Add the contact info. for each company, the beneficiary, any balances and account numbers and then make it accessible to the right people. Review it annually. Rinse, cycle, repeat!

And don’t forget to list, review and update your beneficiaries! I cannot stress enough the importance of this!

Even though my beneficiaries were listed on my sheet, I worried about whether I linked everything to my trust correctly. It took a simple email to ask the bank to update my beneficiaries with the trust information. They had everything printed for me that day, I went in, reviewed it, signed and was done in five minutes. It isn’t as complicated or time intensive as you think. The peace of mind is completely worth it!

Gina: As a financial advisor, we would help clients create these and called them “single sheets.” Basically it was a one page document that encompassed all of the pertinent details of a client’s financial situation – both for the client’s benefit, as well as their beneficiaries should something happen to them. We traditionally did this for older individuals/couples, but as Erin’s experienced, EVERYONE should start and maintain one. Make sure to share this information with your spouse or build/maintain it together!

Do you have a single sheet? If not, do you now plan on starting one soon?

Photo Credit: Images_of_Money via Compfight cc

The Importance of Updating Your Beneficiaries

The Importance of Updating Your Beneficiaries

photo credit: Dwonderwall via photopin cc

Not paying attention to how life events can impact your financial affairs can be devastating. Just ask Erin.

Updating beneficiaries after a marriage, divorce or death can be inconvenient and in some cases painful, but it is also oh so important! Any of these life events should trigger the “to do” of reviewing your financial situation as a whole.

We’d like to share a bit of Erin’s story and how a slight oversight can have great effects should something unexpected happen. Hopefully this will motivate you to make any changes you’ve been putting off and/or check with your loved ones to make sure they have recently reviewed their own beneficiary designations.

Inheritance to the Wrong People

Steve, Erin’s deceased husband, had overlooked changing the beneficiary on his employer 401(k) plan after they got married. He had updated the rest of his financial assets and policies, but missed this one. His beneficiary never got changed from his nieces – the three that were alive when he started working for his company in the mid-90’s. He had worked there for 15 years before he unexpectedly passed away in August of 2013.

When Erin went to transfer the account into her own name, she was surprised to find that she wasn’t the beneficiary listed on the plan. Since he and his employer had been contributing to this account for the past decade and a half, it had a significant balance – enough to make a difference in the lives of his wife and two young daughters that were left behind.

If you’re left money you can decide to accept it or disclaim it – meaning that you reject the gift. This is done commonly when mistakes (or oversights) are made or if the beneficiary doesn’t feel that they need the resources. Disclaiming a gift relieves your personal tax burden and passes the burden onto the person that accepts the money.  If the money is disclaimed by the beneficiaries is it allocated into the decedent’s estate for management.

Unfortunately his designated beneficiaries didn’t agree with Erin – that Steve would have left his 401(k) plan to his wife and kids and they decided to keep the money for themselves.

Erin begged and pleaded with them to change their mind. She reminded them of Steve’s passion for education and the fact that he would have wanted his hard earned money to be used to ensure his children could receive a quality education for their future. The request to put even a portion of the money into a 529 for their children was denied.

Since his three nieces were listed, she had little recourse and had to accept the situation as is. Unfortunately people don’t always react the way you thought they would when it comes to money after a death. If you believe people will make the same decisions as you would when you are gone – think again!

Review Beneficiaries Regularly

For most people, there is no need to review beneficiaries annually. As mentioned above any major life event should trigger a review however. Especially marriage, birth of children (or grandchildren), divorce and death should warrant a review and potentially changes.

Old employer retirement plans are often overlooked. So are current 401(k)’s, POD’s (payable on deaths) on bank accounts and TOD’s (transfer on deaths) on non-qualified brokerage accounts. You can also add property beneficiary designations to real estate in many states these days, which you file with your county recorder.

One consideration for beneficiary planning is to have at least one cash account listed as a POD to the person that would help manage your funeral plans. This will ensure that funds are available immediately for initial expenses without putting an undue burden on your trusted person.

Take Action

We’ll expand on estate planning more in future posts, but for now please take a few minutes to compile a spreadsheet of your current assets/accounts and make sure you document who the beneficiary is on each of them. If you are not 100% sure, request a new beneficiary form and complete it immediately. If you don’t have a beneficiary listed, consider adding someone. This will avoid the probate process.

Keeping a spreadsheet of your accounts, the contact information of the account, and the beneficiary will ensure that you have an easy reference document. Once this document is created you can easily review your beneficiaries on an annual basis in 30 minutes or less.  Think of this time as an investment in your family’s future.

Due note that the beneficiary designation on an account will ALWAYS trump what is listed in your will. This is often misunderstood!

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