Monday, May 17, 2021

How to Help Procrastinating Clients Organize Vital Estate Documents

Their heirs will be forever grateful that you spared them from endless searches for wills, passwords and other records.

Deborah Danger

As an estate planning attorney, I’m not at all surprised by the angst-filled story of Stefan Thomas.

In case you haven’t encountered it, here is a summary: Recently, after his 7,000 bitcoins had grown to more than $220 million in value, Stefan wanted to access the digital wallet where they were stored. Unfortunately, he couldn’t find the password to unlock them and the paper where he’d written it down was gone.

My clients frequently regale me with stories that to them, are nearly as frustrating as this one. There are tales of misplaced safety deposit box keys, life insurance policy information, healthcare proxy forms and yes — passwords.

We’re all human and it’s easy to lose information.

But my mission is to help clients overcome these tendencies and centralize important documents before they are incapacitated or pass away, so that their affairs can continue without their participation. That way, the legacy they leave behind is that of being thoughtful and well prepared, rather than the source of preventable suffering.

Trusted family members and friends — including those named to serve as healthcare proxies, agents in powers of attorney and personal representatives in wills — must be able to access the information and assets over which they have been granted power.

Being able to quickly find a loved one’s health insurance card, list of current medications and allergies, and doctors’ names and phone numbers could even be lifesaving.

It goes without saying that those designated to take over in emergencies or in the event of a death should also have extra keys to the house and car, as well as an extra checkbook (if they have signing authority).

Safety deposit box signatories (there should be more than one) should also have their own organizational systems — so they know where the keys to the box are if they need them.

Easing Reluctant Clients Forward

How should clients begin to organize the papers others will need?

Many of my clients are seniors who may not even have a smartphone, let alone a scanner or access to the cloud, so I recommend that they start with a plastic bin.

To make it easy, I suggest that into this bin they toss their homeowners, life insurance and/or long-term care policies; a recent credit card statement; an expired driver’s license (so that the number is accessible); their passports; birth certificates; Social Security cards; proof of military service (DD Form 214); bank and investment account statements; a running list of passwords; and estate planning documents. It’s not a perfect system, but it’s better than tucking these items into random drawers, file cabinets and folders, and assuming someone will be able to deduce where they all are.

From Bin to Binder

When they are ready, I recommend transferring these documents from the plastic bin to an organized three-ring binder. Each document should go into a separate transparent sleeve so that it’s easy to periodically replace outdated items with new ones.

Old water, electricity and gas bills are good to insert too, in case someone needs account numbers for any reason. The same goes for their real estate tax bill so the parcel number can be accessed.

Other documents to gather include tax returns, a list of monthly obligations such as HOA and time share fees, mortgage payments, loans made to others, loans owed to others, any pending lawsuits, and contact information for you — their financial advisors. A prepaid funeral or headstone contract, and a title to a cemetery plot, are also invaluable for agents and fiduciaries.

I try to meet people where they are. A password manager or an online legacy locker is outside of the range of many of my clients. Insisting they use one of these will fall on deaf ears.

However, if I can get them to gather their information in a binder, the next step of scanning each page and saving the information on a thumb drive can be delegated to a friend or family member. They can safely store the device, or eventually save the contents, securely, to the cloud.

The thumb drive can be kept in a safety deposit box, fireproof document bag or a safe — which is also a good place to store beneficiary forms, pension documents, annuity information, IRA and 401(k) statements.

Beware, though: A safe is only “safe” if it can withstand water and house fires (up to three hours). And to avoid a scenario like Stefan Thomas’s, combinations or keys must be accessible.

Originals Matter

Most of the documents I recommend clients save are copies that can be replicated.  However, estate-planning documents, divorce decrees, name change documents, separation and prenuptial agreements, marriage certificates, adoption papers and birth certificates are usually stored as originals. Knowing where these are is critical during a crisis.

Imagine, for example, losing both parents and not being able to implement their wishes because they lived in a state that required original, signed and notarized wills (versus copies), which are nowhere to be found.

Advising Business Owners

I work with many business owners who plan to die at their desk. They don’t want to talk about a succession plan. However, I plead with them to, at a minimum, prepare a durable power of attorney for their company or even consider transferring it to their revocable trust. That way, someone can continue to collect rent, make payroll and enter contracts that benefit and preserve the value of this asset.

This information should also be centralized in a safe or some other means of accessible storage.

Items that Grow Legs

I recommend that clients log photos of important items, such as jewelry or other valuables. If they are not in a safety deposit box, each of these items can grow legs when a house is first accessed. Tiny and portable items tend to disappear.

Clients should also ask a relative or friend to help them put together a system for digital and other family photos that future generations will treasure.

When Cash and Halibut Cohabit in the Freezer…

Some clients are inclined to keep cash in out-of-the-way places. I encourage them to make a list of those locations available. Whenever I visit a client’s home either because they are incapacitated or have died, more often than not, a quick glance at the foil-wrapped items in the freezer, even those marked “Halibut 2/1/2020,” reveal cold cash that may have been otherwise thrown out.

The Opportunity for Financial Advisors

As partners to our clients, our shared role is to steward their wealth, assets and values — before and after their death. This includes honoring and supporting the people that they loved. Making it easy for everyone involved in their lives to carry out their wishes is both an honor and an obligation. In that spirit, one of the most “basic” parts of the process — advice on document management — is also one of the most essential aspects of our work.

Estate Planning and Probate Attorney Deborah Danger, Esq., LL.M. (taxation) is the Managing Member of DangerLaw, LLC, Newton, Mass. Contact her at deborah@dangerlaw.com.

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