Estate planning often involves a deep dive into an individual’s finances. And many financial accounts – especially those that include savings – are developed with a ‘set it and forget it’ mentality. Even some estate planning documents are developed with this attitude. Individuals will go through the process and believe that the issue is covered. But in life, change is constant. And failing to update your accounts and financial documents can leave your loved ones in a legal mess in the event of an untimely accident or illness.
The following list of financial documents should be prioritized when developing an estate plan or updating one.
1. Financial Account Statements
In today’s digital-based world, many people have multiple financial accounts, including checking and savings accounts, investment accounts, cryptocurrency accounts, and accounts created on behalf of others, such as an educational account. And many of these accounts are spread across multiple financial institutions or organizations. Without recent statements, it would be hard for anyone to ascertain where all of your accounts are located.
And estate plans must include these assets when determining how to allocate property. Therefore, it’s always a great idea to have updated account information on hand when reviewing or creating an estate plan. Going through a thorough review can also help you to make smart financial decisions, such as closing an account that never gets used or combining accounts when it makes sense. It can also provide you with an updated snapshot of your financial situation.
In addition to updated account statements, it’s also crucial that the individual making the plan create a detailed list of accounts that includes the account numbers, owner’s name, and any log-in information that the appointed executor may require. This information is essential, and without it, a financial institution may deny access to the account. In these instances, the executor may have to jump through many hurdles before any actions can be taken with the assets contained in the accounts. As you gather account information, take the time to check that beneficiaries are up to date. Do this with life insurance policies, as well.
2. Life Insurance Policies
For some families – especially those with dependents – life insurance may represent the largest portion of assets that a deceased family member can leave behind. But the amount of life insurance that an individual may need often changes throughout their lifetime.
The most obvious use of life insurance policies is to protect children or other family members that rely on you for financial support. The loss of your income could be devastating to the family. A large insurance policy is one way to ensure your loved ones’ financial needs are met even after death. Even for younger or retired individuals, however, life insurance policies can be in effective estate planning tool.
Regardless of the reason you have purchased life insurance, reviewing and updating your life insurance needs periodically is one way to ensure that you have the proper amount of coverage as your situation changes throughout different stages of life.
And while many people establish policies with the intent of providing for their loved ones after their death, many life insurance benefits go unclaimed every year for reasons including:
- The life insurance company and the policy owner have lost track of one another. The truth of the matter is that people often move, change their number, get a new email address, or make other changes to their personal information. When the life insurance company isn’t properly updated to changes in contact information, the communication channels may break down. If this happens, your beneficiaries may be unable to locate the policy or identify the company that holds it.
- There is a failure to inform the life insurance company of the death. Life insurance companies do not monitor their policyholders, which means that beneficiaries or executors must initiate a claim. If these individuals cannot locate policy information, a claim cannot be started.
- The original life insurance company was sold or cannot be located. As in other industries, sometimes life insurance companies are sold or merge with other companies. Without updated policy documents, the beneficiaries may not be able to file a claim with the right policyholder.
While there are a few other reasons life insurance benefits go unclaimed, the listed ones highlight the importance of holding and maintaining timely life insurance documentation. This documentation is crucial in ensuring that the benefits go to your loved ones when they need it most.
3. Deeds & Titles
Deeds and titles are legal documents that acknowledge the ownership of an asset. These documents are often required for real estate properties, vehicles, and many other valuable assets. And while people generally place these documents in a safe location, it can be easy to lose track of them over a span of years or decades. When reviewing your financial documentation, it’s a good idea to locate your property titles. Review and update any beneficiaries, and ensure they are kept in a secure location that may be identified in your estate plan or is at least known by the executor of your estate.
4. Pension And Retirement Account Statements
Like life insurance policies, many individuals might hold a pension or a retirement account with a company they haven’t communicated with in years. But these accounts may have grown exponentially throughout the year. But to access these assets, your beneficiaries must know about the account and should have a good idea of the value, too.
When requesting an updated account statement, it’s also a great time to review the beneficiary or beneficiaries listed on these accounts. Having a properly designated beneficiary on retirement accounts can prevent these assets from going through the probate process even if the rest of the estate must. If the account is older, you will also want to ensure that the beneficiary or beneficiaries listed are still the ones you would like to receive the asset upon death.
These financial documents provide a foundation for providing an overall view of the state of your finances. However, it is a good idea to also consider other financial documents that should be addressed. For instance, if you own a business or shares in a business, these should be reviewed and updated periodically, as well.
The bottom line is that prioritizing financial documentation can become difficult, especially if you have complex financial arrangements. It may be beneficial to discuss your unique circumstances with an expert estate planning attorney.
