How to Organize Your Finances for Your Loved Ones

If someone will need to settle your estate or care for you because you’re seriously ill, that could mean needing to amass critical financial information about you in a hurry. But this kind of scavenger hunt — finding legal documents, bank accounts, insurance policies, credit cards, online accounts and the like — is very hard when that person is grieving or dealing with a multitude of caregiving issues.

That’s why you should take the necessary steps now, before a potential crisis arrives, to get your records together.

I call this focusing on three dimensions: What you want to document, Where it is located and Who should know about it. This way, your loved ones will easily be able to find what they need when the time comes.

3 Personal Stories

Let me give you three examples from my life that will show you why I feel so passionately about this. In each case, well-organized data was — or would have been — helpful:

My responsible aunt She lived independently her entire life and had superb control over her affairs. She was well-organized and kept diligent records. Totally in control, everything was in order. Then, at 83, she had a debilitating stroke.

As a result, she was first confined to a hospital and then admitted to a skilled nursing home, where she lived until passing away at 87.

With great vision, my aunt had made proper preparations in designating both a Power of Attorney and an executor — me. I was blessed that she had kept outstanding records. She had a book that listed her stocks, bank accounts and other financial information and a small safe containing her legal documents and the deed to her house, stock certificates and other important papers.

All of this planning allowed me to efficiently manage her affairs. And because she could still communicate when I became Power of Attorney, she was able to clarify details and answer other questions. This aunt was a role model on all three dimensions. What, Where and Who.

My less-responsible aunt I had another aunt who also lived independently, but she wasn’t as organized and was reluctant to share information with other family members, even though she had appointed a Power of Attorney and an executor — me again.

Then she developed dementia, which led me off on a wild goose chase to locate her financial records. I’ll never forget the day I was cleaning out one of her old dressers and discovered three forgotten bankbooks with a total value of $150,000. They had not been presented for interest at the bank for almost three years, and were about to be treated as abandoned property. Sadly, this aunt failed on the What and Where dimensions of organization.

Family friends I also had close family friends who lived on our street. The father had an unexpected massive heart attack in his early 50s and suddenly died. He hadn’t made any advanced preparations and when the tragedy occurred, those left behind had no awareness of their financial condition, nor the location of his records.

I volunteered to help supervise getting his affairs in order to settle the estate. But where were the funds to pay the bills? Was there savings? Insurance? No one knew where to start. That began a tedious task of searching through each room in the house and through every file and pile of papers.

Also, no one knew how to access his computer to see if he had vital information online or in email messages and no one knew his passwords or anything about his online accounts.

Regrettably, history repeated itself a few years later, when the mother also passed away unexpectedly. Although I had set up a process for her for better record keeping, she didn’t follow it to maintain updated information. This created an enormous burden for their children.

How to Get Organized

Please learn from these true events. Here’s how to get organized using the three dimensions I’ve mentioned:

WHAT We can’t expect our loved ones to remember key information about our financial lives without a roadmap of documentation. Think about your insurance, bank accounts, investments, wills, Powers of Attorney, living wills, trusts, custodial accounts and guardianship documents. In addition, in this digital age, there are also your online accounts and passwords.

WHERE Think about where your critical information is stored. Can it be found easily?

WHO This is about proactively designating someone or some people to manage your affairs as your Power of Attorney or executor allowing them to legally act on your behalf. Once you’ve chosen these people, be sure to tell them. If you find the topic too uncomfortable to discuss, at least tell them where to find an envelope you’ve created or the place in your home that has all the key information.

Lists to Prepare

If you do nothing else, at least prepare basic lists manually and let your family know their location. It’s actually a simple process to quickly organize your data.

First, develop your categories: Bank accounts, insurance policies, investments, online accounts/passwords, credit cards, etc. Next, for each category, think of the specific information you want to collect. This can be managed in spreadsheets or in a Word document, but you don’t need to use a website or even a computer. You can manually write it all out, and develop a binder.

One more thing: Remember that this is not a one-time effort. You need to review things periodically to keep your financial information up to date.

I believe getting your financial information in order is so important that I developed a tool, www.MyLegacyBackup.com, to help people do it (Next Avenue readers get 1/3 off by using the NextAvenue promo code). This is not a sales pitch, but by using the TryItFree option without signing up, you can see how it works.

If you decide to use any online solution to organize your financial life, be sure it’s a secure site. And even if it is, do not store complete details there which could facilitate a theft! For example, I ask my clients not to list their full credit card numbers or passwords and PINs online. Rather, storing only the last digits and the 800-number of the financial institution’s customer service will be adequate information to get to your specifics quickly.