Tax season is over. School is starting to wind down. Summer is coming.
The wealthy have family offices to track these things. For the rest of us, there’s the Big Book.
It includes life’s important documents, including driver’s licenses and insurance policies, investments and real estate deeds. Photocopies of passports, credit cards and wills. It has lists of “stuff,” from the artwork your mom left you to the Oriental rug that has been in the family for three generations. It lists the antique Singer sewing machine, silverware and the Haviland china. It might even include the Redskins season tickets that have been handed down since the days of George Preston Marshall.
The Big Book could be a three-ring binder resting in a safe place or a virtual vault locked somewhere in the cloud.
“I call it a master directory,” said Christine Benz, director of personal finance at Morningstar. “That’s kind of a fancy name for something that’s really quite simple. Having a resource like this and keeping it up to date is just such a valuable component. The crucial benefit is in case you become disabled or if you pass away, your loved ones will have some sort of blueprint for your financial assets and financial dealings.”
Jamie Cox of Richmond-based Harris Financial Group calls the exercise “Financial Planning 101. Making sure you are organized is the most fundamental principle of financial planning.”
Here are some suggestions I have compiled from my own family, as well as others, including lawyers, financial advisers and investment gurus.
The first section should include copies of “important documents.”
These can include agreements with professional services such as a financial adviser, lawyers or accountants detailing the extent and cost of services rendered.
The important documents section might also include copies of passports; anything you keep in your wallet, such as AAA memberships, work IDs, credit cards and Metro fare cards; and your marriage license, birth certificates, and Social Security and Medicare cards.
It’s not just for the benefit of the people who outlive you.
Financial adviser Lori Atwood and her family found themselves stuck in Newark recently when they needed to quickly update a passport for their daughter to make an overseas vacation.
“We were at the airport counter and ready to check in, and they said we could not get on the flight,” Atwood said. “We were at the passport office the next morning, but we didn’t have our daughter’s birth certificate. I had to call the dog sitter to go up and go to a safe and take a photo of the birth certificate.”
“It was made easier because we had the documents all in one place,” Atwood said. “We still missed three days of our vacation.”
In our house, we — well, my wife, really — organized a section called “Real Estate & Automobile.”
This includes what you think it does: the contract with our cooperative building, where we own shares; our homeowners’ insurance; the title, registration and insurance policy to our car. My wife even included the backup for the E-ZPass because it would have to be canceled if we got rid of the car. Home warranties and the like would also go into this section.
The next three sections of most Big Books can detail any bank accounts; investments, including stocks and mutual funds; and, finally, a list of retirement accounts.
This is important stuff, and the sooner you do it, the better your chances of achieving financial independence.
“The average American is so disorganized and has no idea what their true net worth and true holdings are,” Cox said. “But getting organized gets you focused, and once you realize what you have, it’s easier to have a plan about where you want to go.”
If you own stock, mutual funds, savings accounts, money markets or have a retirement account or some other financial assets, you might want to list them next. You can call one “Taxable Investment Accounts” and the other “Retirement Accounts,” because some assets are inside employee benefit plans that might require different procedures to access.
Don’t forget to include your custodial information — account numbers, etc. — for your pension plans, if you are fortunate enough to have one.
Cox said he recommends clients keep records virtually through Emoney software, which is owned by Fidelity Investments.
“It has an online vault where you can store anything,” Cox said. “It’s consolidated, in a way, because it links all the accounts from the disparate financial institutions.” Cox said a physical binder can be less efficient than online record-keeping.
“The binder is good for information, but it’s not real time,” Cox said. “The way our system works is that all the information is consolidated, the account numbers and holdings are up to date. If you change accounts or advisers or banks, you just reconnect to the new institution and all the information flows in. You have history.”
Washington estate attorney Michael Curtin said one of the most important parts of preparing the Big Book or any other estate legacy is to find a home for your digital sign-ons and passwords.
“We all live in this crazy, password world now, and it’s a tricky thing,” Curtin said. “People ought to provide all of their passwords in a safe place. They should have some language in the will or trust that allows the fiduciary (estate attorney) to access all of those passwords and accounts. People have Apple accounts, Fidelity accounts, Amazon accounts that are password-protected. Those accounts can have money and assets in them.”
Or maybe they just have family photo albums or travel pictures from past decades.
Next on your list should be insurance policies. Because my wife and I are in our 60s, we have a section titled “Long Term Care Insurance.” I recently bought a long-term care policy, and my wife has one through her employer. My purchase was a big chunk of change, but after watching family members liquidate assets to cover home care, we decided long-term care is prudent.
In addition to long-term care policies, you might want to list separate sections with headings for “Life Insurance” and “Long-Term Disability.” You can buy these independently or through an employer.
Cox said people tend to ignore their insurance records.
“Insurance is the least organized,” Cox said. “It’s a one-time transaction. You set it and forget it. It’s very difficult to track it and maintain the proper beneficiaries.”
That’s so true. A relative of mine left a pretty hefty life insurance policy that was taken out decades ago through an employer. It turned out to be a major headache to track it down, get it paid and put in the hands of the correct beneficiaries.
That goes for other pieces of the asset puzzle. In other words, not all financial assets are treated equally.
“The parts of their financial portfolio that are more organized are the parts they either understand the most or they consider their golden goose, their jewel,” Cox said. “Like a 40-rental property portfolio. You probably have a good understanding of it and keep good records. But you may have a completely disorganized 401(k) investment account if it’s not a prominent part of your net worth. You pay no attention to it.”
Curtin issues his own black book that contains all the legal documents needed to dispose of one’s estate. You hate to think of it, but what if you get Alzheimer’s or some fatal malady? You should designate a health-care proxy to make decisions for you, such as how long to keep you alive if you are pretty much out of it.
The other important legal documents in Curtin’s black book are wills, funeral arrangements, durable power of attorney and digital access to email, social media, and those Apple and Amazon accounts we talked about. (Amazon chief executive Jeffrey P. Bezos owns The Washington Post.)
You might also want to list any and all of your health-care providers, physicians, medications, etc. You might also want to list family and friends, in case both spouses go at the same time and the lawyer or police need to notify others.
The rest of our Big Book is rounded out with credit cards and loans. Country club memberships, which can include stock holdings in the club, can also go in this section. So can gym memberships, etc.
Other assets could include jewelry, china, art, furniture, baseball card collections, rugs, etc. and — most valuable of all — my to-die-for Washington Nationals tickets.
If I could, I would take the Nats tickets along to the Pearly Gates.
● Important documents, including copies of passports, work IDs, marriage license, birth certificate and Social Security cards
●Real estate and automobile paperwork, including insurance, title, and registration and warranties
●Bank accounts and investments, including stocks, mutual funds, and retirement account numbers and custodial information
●Digital sign-ons and passwords
●Other insurance policies and estate-planning documents
●List of health-care providers, medications and emergency contacts
●Credit cards and loans