Demographic shifts and surveys don’t always tell the whole story, but they are pretty telling when it comes to the subject of inheritance.
People are living longer in retirement, healthcare cost are skyrocketing (especially long-term care) and although recent inflation numbers don’t show it, things just cost more these days. This explains why a USA Today/Gallup Poll shows that only 28% of U.S. adults expect some type of inheritance. Keep in mind that the results are from the fall of 2007 (at the start of the “Great Recession”), I suspect the numbers would be much lower today.
In lieu of a large lump sum of money what can parents/grandparents pass along today besides a name legacy and solid upbringing?
Answer…..Having your financial house in order.
Even if only a small amount of money is passed on, the amount of time and agony heirs go through to settle an unorganized estate makes them wish that there was nothing there. Having a will or trust in place is first on priority list to organizing your estate. Here are some other things you can do to get organized:
Let them know where the “bodies are buried”
Discussing money with children is something not a lot of parents like to do. You don’t have to give them a personal balance sheet while you are living, but don’t turn your kids into treasure hunters.
I suggest putting a spreadsheet together with the types of accounts you have along with the financial institution’s contact information. List specific names whenever possible; such as your favorite personal banker. This spreadsheet should be kept in a safe place (e.g. safe deposit box or home safe) and your heirs should know how to access the information if they need to. Update the spreadsheet at least annually.
You should also put together a list of bills, how they are paid (e.g. automatically, by check, etc.) and when they are due.
Clean up your portfolio
Throughout your years you may have accumulated a lot of accounts at different institutions. Many times these holdings can be consolidated into just a few accounts without compromising diversification and asset allocation. There is no reason to have five different IRA accounts. Coordinating your required distributions while you’re alive is difficult enough, let alone the red tap your beneficiaries will have to go through at your death.
Get rid of stock certificates. Holding the physical certificate used to be the norm, not anymore. Stocks should be held in “street name” at the company’s transfer agent or a brokerage firm. A financial advisor, planner, or broker should be able to help you if you need some help with this.
Let them know who you trust
We discussed in a previous post about putting together your financial team. If you have a solid financial team put together you should be able to say, “If anything happens to me call Jim, he’ll know what to do.” Make sure your financial team has the proper contact information for your heirs/beneficiaries. They can lighten much of the load. They’ve been through this before and most likely this is your children’s first and only time.