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How to Prepare, Organize and Store Estate-Planning Documents

This is a great time to get organized with estate planning—it will make things a lot easier for yourself and your loved ones.

I have covered consumer news for over two decades and understanding estate planning is an important topic that always needs to be covered and continually updated.

Trying to understanding the different types of estate planning options and the must-haves of important documents can get confusing. I have dealt with probates, people who do not have the proper documents in place and others who don’t remember where their documents are. All of these scenarios are not fun and can cost you or your heirs money.

Since this is the time of year when many of us are taking stock of our paperwork as we close out 2021 and prepare for a more organized 2022, I wanted to help simplify things. I connected with Chanel Reynolds, chief customer officer at Trustworthy and author of “What Matters Most” for insight on how to effectively organize, store and utilize important information and how to prepare for those “what-if” moments.

What are the most important documents for someone to have prepared and stored?

There are a few categories of documents that are really important to have ready and accessible. These include:

Your legal or estate-planning documents. The most common documents in this category include a power-of-attorney document, a living will (also called an advance care directive), and your will. Here’s some background on each.

Power-of-Attorney document: While a will is created to distribute assets after a death, a POA is related to decisions during your life. With this document, you designate someone, or a few people, to act or make decisions on your behalf if you’re not able. This document can be very helpful in situations where you or a family member becomes incapacitated or are facing a serious illness (for example, if someone becomes very ill with COVID and is put on a ventilator or needs long-term care.) A POA is also often used to help advocate for and assist aging parents.

  • Common POA roles include empowering someone you trust to make medical and financial decisions for you.
  • Also, you can (and should) specify someone to be named as your Digital POA so they can access, claim or close any of your dozens of online accounts.
  • Because so much of our most critical information lives online (from digital IP to your social media accounts,) if completed and shared, your digital POA will be able to better act on your behalf and advocate for you.

Your living will, also called an advance-care directive: This is the legal document that outlines the types of care you do and do not want when you are at the end of life. In your living will, you define what quality of life means to you — and leave clear instructions to the person you name in this document to speak for you and carry out your end-of-life care wishes. This is an extremely helpful document and one that every adult should have.

Your will: The most common type of will is a testamentary will (the kind we’ve all seen in the movies with all the fancy script that says “Last Will and Testament.”) This document instructs your friends and family on how you would like your assets — including financial assets like money or your home, and more personal assets like heirlooms or jewelry — shared or distributed after you die. Your will is also where you name guardians for your children or pets. Here, it’s important to remember to list a backup person.

Tip: One critical item that is frequently overlooked or misunderstood is naming beneficiaries on your financial accounts. These are referred to as non-probatable assets and whoever you write down (or is still listed) on those forms at each bank or financial institution gets the money or assets. Keep in mind the following:

  • All your financial accounts (401(k), investments, savings and checking accounts, etc.) ask you to list a beneficiary, but many people neglect to name someone or forget to update them over the years which means a potentially very large amount of money can go to the wrong person.
  • It only takes a few minutes to update your beneficiaries and most banks allow you to do this online.

How do people put their most important financial information to the best possible use?

One of the most frequent questions I’m asked is, “What’s the best way to store and share all this important information?”

My immediate answer is, “the best system is the one you’ll use to store your most important information, and to share your most important information with your trusted friends, family or professionals who will need access to it.”

And just like naming guardians for your kids or pets and listing beneficiaries (always, always, always list a back-up)— you’ll always want to have a back up for your most important paper documents and certifications, along with your digital assets and details.

By securing your most important information from scattered paper files, and from your computer (for many people, this can include PDFs of important documents, pictures of passports, that “file me” folder, etc.) to a smart, organized, and structured cloud-based system means it’s always there whenever you need it. Just as importantly, you can share all, or just a few, of those important documents and details with your trusted friends, family or professional advisors so they have access when they need it, whether it’s tax season or if one of your trusted contacts needs access to your emergency contact list.

For so many families I’ve worked with over the years, and the thousands of Trustworthy members we’ve heard from this year alone — the daily stress of those piles of paperwork staring at you from the corners of the room and spilling out of your files adds up. Simply by starting with the various IDs in your wallet or purse and scanning them with the Trustworthy app or uploading them feels like a victory. This information has become the nuts and bolts of our daily lives, and hunting around the house for that important document or forgetting passwords to your critical accounts can create a long, grinding halt in your otherwise already very busy day.

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It’s important to consider companies that protect your privacy, information, and do not sell your data when selecting a tool for storing your information digitally.

When should someone use a will versus a living trust?

Both a will and a living trust are documents used to name beneficiaries for your property, but there are key differences between the two. For example, trusts are often used to expedite or ‘skip’ the probate process, where a will additionally names guardians, contains instructions to pay debts, and goes through the probate process.

Trusts can be set up in a number of ways and whether or not to create a trust depends largely on each person’s or family’s situation, what their goals are, and often which state they live in. Setting up (and funding) a trust can be an excellent way to transfer assets or property more efficiently or with fewer costs when someone dies.

A trust can be set up to become ‘active’ once it’s created and funded. Or, like a more traditional will, it can become effective once you die. Often, having both a will and a trust makes sense for many families.

Finding an experienced attorney in your state to discuss your goals and options is a good idea to be certain you have all the information you need.

What should be considered when deciding between a revocable trust and a non-revocable trust?

Whether or not you would like to change or update your trust during your lifetime is a big factor in deciding if you would be better served by a revocable trust (a trust you can “revoke” or change, update or dissolve), or one you generally cannot (a non-revocable trust) where the assets are owned by the trust, making any changes to a non-revocable trust is difficult in part because all beneficiaries must agree to any changes.

Some scenarios to consider when making this decision include whether or not you have shifting family dynamics and if you may decide to add or remove family members from your trust in the future. Other considerations could be to avoid tax implications, retain privacy, protect against creditors, or perhaps relinquish ownership or control of assets or property.

Ultimately, discussing trusts and any other estate planning needs and questions with an attorney in your state is highly recommended.

Can you explain the challenges and difficulties people face when they don’t have the proper documents prepared and stored? For example, if they become ill and do not have someone authorized to make proper medical decisions on their behalf.

One of the most heartbreaking stories I've heard far too many times is when someone's life partner or closest friend/ally is not allowed in the room by hospital staff or by a blood relative. This is typically because they weren't legally married and weren't named in advance-care directive (or there is no advance-care directive.)

Besides losing money or some of your assets, which can be significantly heartbreaking in itself—so many of us lose what we’ll never be able to get back; the time with those we love. Consider the value of having a few conversations in advance so we can better understand what someone’s wishes are instead of guessing or wondering if we’re doing the right thing and then worrying that maybe we didn’t.

If you don’t designate your own medical decision maker, someone else will make that choice for you.

After a week in the ICU, my husband had not regained consciousness and all the doctors agreed his condition was “unrecoverable.” I removed medical support. It was the hardest thing I’ve ever had to do and I was 100% certain, then and now, 12 years later, that it was absolutely what he wanted. How do I know that? Because we talked about it together.

While the plans we made weren’t perfect, the items we had organized in advance made a world of difference to me and our family.

What are the difficulties, headaches and challenges left to heirs when someone doesn’t have a will or trust in place?

I can tell you that I spent hundreds of hours talking to what I eventually came to call the “I’m sorry for your loss department.” Getting my cell phone turned back on took at least three or four long, terrible conversations. Trying to locate which cloud service our wedding photos and the baby pictures were stored in — and then trying to get access — was exhausting. And because our wills were drafted but hadn’t been signed I had to pay thousands of dollars for an attorney to help me navigate the probate process because it was just too confusing and overwhelming for me to manage alone.

Dying without a will is called ‘dying intestate’ and you do not want this. The probate process takes longer, costs more, and the state decides for you where your assets go and which heirs will get them. If you don’t agree with your state on everything now, you may not like at all what they decide on your behalf after you die.

Dying with a trust you’ve set up, but that you didn’t fund or complete, is a very common mistake and it means the trust is not active and could be subject to probate.

One of the main triggers for creating a will is to name guardians for children, for pets, or to establish care guidelines and additional guardianship terms for an adult family member with special needs. Very frequently, family pets are surrendered to animal shelters after their owner dies if there aren’t plans made in advance and shared.

In addition to probate costs and uncertain legal outcomes, there are many additional headaches that can be avoided by making it easier to find and access your important information. Just think of the dozens of moments each day or week where we can’t find a password, or need to dig up a new insurance card or policy number that has gone missing.

Having a few things written down, like the password to my late husband’s phone and the usernames and passwords to the accounts he managed, would have saved me dozens of hours of tracking things down when I was at my worst. Perhaps there are online accounts out there that I couldn’t locate or track down that drifted off and I’ll never find. Did he buy Bitcoin all those years ago? I’ll never know.

Living through that is what inspired me to write "What Matters Most" and has convinced me that what we are creating at Trustworthy is such a valuable and critical toolkit so many families and households really need.

The 15 minutes I spent scanning and uploading my most important documents with the app means I have easy access when I need them. It only took five minutes to share select files with my son and parents and also share everything with my partner as a full collaborator. Knowing they will have immediate access to whatever documents, passwords or medical details they need is an immense relief and quite honestly, helps me sleep better at night.

Jeanette Pavini is an Emmy Award winning journalist specializing in consumer news and protection. She is the author of “The Joy of $aving: Money Lessons I Learned From My Italian-American Father & 20 Years as a Consumer Reporter.” Jeanette is a regular contributor to TheStreet. Her work includes reporting for CBS, MarketWatch, WSJ Sunday, and USA Today. Jeanette has contributed to “The Today Show” and a variety of other media outlets. You can follow her money saving tips and ways to give back on Facebook: Jeanette Pavini: The Joy of $aving Community. Find links to her social media and her book at JeanettePavini.com.