At the start of every New Year a slew of estate and retirement planning articles suggest that now is a great time to discuss your investments and assets in the event you pass.
This is good advice and a serious subject indeed. But we’d suggest an alternative means that may be more lasting, more meaningful, and allow you to spend the New Year enjoying your grandkids rather than giving your daughter or son-in-law a financial run-down.
In our view, writing a letter to your heirs with contact information and basic instructions—a user guide, if you will—would be a big help should you pass or become incapacitated. While wills and living wills are great—and nothing will take their place—they don’t necessarily touch on everything, and if you’re like us, you aim to make tidying your affairs as simple as possible for your family.
Here are a few points to consider:
Will your spouse or kids know who to contact in the event you pass?
Perhaps you have your retirement assets and other investments with several different financial firms. Perhaps you have only one. Introducing your heirs to your financial professional(s)—or at least noting the contact parties to both your financial professional and your heirs—is a good idea that can really smooth over affairs after you pass.
List out your financial relationships; including the contact party, telephone number, and any other information pertinent to you. You needn’t list account numbers—just putting your heirs in contact with the right person is a step in the right direction.
Do your heirs know where your will and/or other important documents are?
This is a question of logistics, but an important one nonetheless. Make sure your heirs know where to find your will or trust and other important documents. It’s a simple thing to do, but one that can prevent a lot of trouble. A lost will can mean probate court, which you probably don’t want to subject your heirs to. You may want to provide a responsible relative or close friend with a copy, so your intent is known.
If you hired your financial professional as a succession plan for you, make sure your heirs know it. Quite a few of our more than 26,000 American private clients hire our firm because they want to have a succession plan in place—they’ve invested on their own all their lives, but maybe their spouse isn’t as up-to-speed or interested. They hire a professional in case they become incapacitated or pass.
It’s a nice intention and a good idea, but in our experience the key to making it all work is ensuring your heirs know your intent. A sad truth of the investing industry is that many times, less-scrupulous firms will attempt to forge relationships when people are vulnerable. Heirs suffering the pain of your passing fit that description. (Don’t take our word for it—here is The Wall Street Journal covering one broker who called himself, “The Funeral Crasher.”) Here is an insurance agent who gets referrals from funeral homes. In our opinion, it’s unseemly—but it happens, and you should be aware of it.
In our view, the best way to make this clear to your heirs is to write down your intent. Make sure they know you hired your adviser as a succession plan. They are taken care of. And, might we suggest, include a suggestion that they not make big changes immediately after you pass. Emotions—particularly grief—can lead to poor retirement planning and financial decision making.
Information like the above might change over time, so you’ll need to review and update your instruction letter.
Again, nothing is wrong with having a family financial meeting—it’s a good idea! But people can have very different recollections of what was said years earlier when they are in an emotional state. Having a user guide for your heirs can help ensure there is no miscommunication. It might also make that meeting go quicker, allowing you to get back to playing with those grandkids of yours!