If you got an unexpected diagnosis or had a medical emergency, would someone know how to pay your mortgage and keep your lights on? Could they find your health insurance information?
And if you died unexpectedly, would your family know where to begin? Do you have life insurance? Would they know where to find it?
While a will and other estate planning documents are, of course, a critical part of preparing for the unexpected, there’s another, more practical part of the process: making sure someone you trust knows how to find and access your estate and financial information.
You don’t need to hand over your passwords or give someone access to your money today. Instead, think of it as creating a financial emergency file — a map of what you have, where important information is kept and the key people your loved ones should contact if you can’t manage things yourself.
Here’s what to include in your financial emergency file:
Table of Contents:
What Estate Planning Documents Should Everyone Have?
Create an Inventory of Your Financial Accounts
Make a List of Your Bills and How They’re Paid
Document Your Insurance Policies
Create a Secure Plan for Passwords and Digital Accounts
Make a List of the People Your Family Should Contact
Decide Where To Keep Your Financial Emergency File
Tell Someone You Trust Where To Find Your Financial Emergency File
How Often Should You Update Your Financial Emergency File?
Have This Financial Emergency Conversation With Your Partner and Aging Parents
1. What Estate Planning Documents Should Everyone Have?
Let’s start with the key legal documents:
Will: A legal document that states how you want your property and assets distributed after your death.
Trust (when appropriate): Some people have trust(s) as part of their estate plan to handle complex family situations and/or to avoid probate. Unlike a will, not everyone needs a trust.
Durable Financial power of attorney: allows someone you trust to handle financial and legal matters on your behalf if you become unable to do so.
Advance directive/living will: lets you state your medical wishes and, depending on your state’s laws and the document you use, name someone to make health care decisions for you if you cannot.
Review these critical documents periodically and after major life changes. However, simply creating these documents isn’t enough. Someone you trust needs to know they exist and where to find them.
Don’t Forget Beneficiaries
Don’t forget to update beneficiary designations on your accounts, because they can override what is listed in a will.
2. Create an Inventory of Your Financial Accounts
Now it’s time to create a map of your financial life.
Make a list showing where you have:
Checking and savings accounts
CDs
Brokerage accounts
401(k)s, 403(b)s and other workplace retirement plans
IRAs
Pensions
Social Security information
529 plans
Health savings accounts (HSAs)
Life insurance
Mortgage or home equity loans
Credit cards
Auto, student and personal loans
Other significant assets or debts
Safe deposit boxes and/or home safes
You don’t have to put complete account numbers, passwords, PINs or even balances in your financial emergency file.
3. Make a List of Your Bills and How They’re Paid
What happens if you’re alive but you are sick or injured and temporarily can’t manage your household?
Someone else may need to pay the bills.
Create a master list that includes expenses such as:
Mortgage or rent
Utilities
Homeowners or renters insurance
Auto insurance
Health insurance premiums
Credit cards
Property taxes
HOA fees
Car payments
Medical bills
Tuition or child care
Subscriptions
Charitable contributions
Other recurring expenses
For each expense, document how it’s normally paid, which account pays it and when it’s due.
One easy way to get started is to review your bank and credit card statements from the last month or two. You may even discover recurring expenses you’ve forgotten about.
And don’t forget about autopay bills. Autopay doesn’t mean you can forget about a bill entirely. If the account funding those payments becomes inaccessible or doesn’t have enough money, those payments could eventually stop.
4. Document Your Insurance Policies
Your family shouldn’t have to search through filing cabinets, email accounts and old mail to figure out whether you had life insurance.
Make a list of your major insurance coverage, including:
Life (including employer and privately purchased plans)
Health
Homeowners or renters
Auto
Umbrella
Disability
Long-term care
For each policy, identify the insurance company, type of coverage, where the policy information is stored and the appropriate agent or contact information.
Again, you don’t necessarily need to put the entire policy into your financial emergency file. You’re simply answering: If my family needed this policy tomorrow, would they know where to find it?
5. Create a Secure Plan for Passwords and Digital Accounts
A growing share of our financial lives exists entirely online. That makes digital access an important part of your emergency planning.
Start by identifying the digital information someone may eventually need, including your:
Primary email account
Phone, tablet and computer
Password manager
Two-factor authentication and account recovery methods
Cloud storage
Online financial accounts
Social media accounts
Digital subscriptions
Important digital photos and files
Don’t create a Google Doc containing every password you have and call it an emergency plan. Instead, create a secure way for someone to access your digital accounts if and when it’s appropriate.
A low-tech option is to keep emergency instructions offline in a locked, fire-resistant home safe or another secure location. You don’t need to give anyone the physical key now, but someone should know that it exists and how to find it if needed. The drawback is that this can be challenging to keep up to date, but it is certainly better than nothing.
A password manager can be a helpful alternative. In addition to securely storing passwords, some password managers offer features specifically designed to give trusted people access in an emergency.
For example, Bitwarden’s Emergency Access feature allows eligible users to designate a trusted emergency contact who can request access to the user’s vault. You can set a waiting period before access is granted, giving you time to reject the request if you’re still able to do so.
Don’t Forget About Two-Factor Authentication
Knowing a password may not be enough to access an account. Two-factor authentication (2FA) can create another hurdle if a verification code is sent to your phone, email or authenticator app.
Important Tip: After a loved one’s death, keep their cell phone active because you will likely need it for 2FA codes.
Team Clark has a full guide to making your online accounts accessible when you die, including more information about password managers and other ways to prepare your digital accounts for the future.
6. Make a List of the People Your Family Should Contact
During an emergency, knowing who to call can be just as important as knowing where your accounts are.
Your financial emergency file should include contact information, when applicable, for your:
Estate attorney
Financial advisor
CPA or tax preparer
Insurance agent
Employer or human resources department
Business partner
Executor
Financial power of attorney
Health care agent or proxy
Don’t make a loved one search through your phone and email trying to figure out the name of your estate attorney.
7. Decide Where To Keep Your Financial Emergency File
Once you’ve gathered all of this information, you need somewhere secure to keep it.
No storage method is right for everyone. Depending on what you’re storing, options might include:
A locked, fire-resistant home safe
A safe deposit box for appropriate documents
Secure digital storage
A password manager for login credentials
Your estate attorney’s office for certain original legal documents
You may end up using a combination of physical and digital storage.
Whatever system you choose, it needs to be secure enough that the wrong person can’t access your sensitive financial information, but accessible enough that the right person can find it during an emergency.
That’s why you should be especially careful about what you put in the file itself.
Don’t create a single document containing your Social Security number, complete financial account numbers, PINs and every password you use and then leave it in an unlocked desk drawer or unsecured cloud folder.
8. Tell Someone You Trust Where To Find Your Financial Emergency File
A perfectly organized emergency file is worthless if nobody knows where to find it.
Choose an appropriate person and tell them:
“If something happens to me, here’s where you’ll find my Financial Emergency File.”
The goal is simply to make sure the right person knows that you’ve created a plan, where you’ve stored it and what they’ll need to do if the time comes.
Important legal note: Knowing your passwords or where your financial records are stored doesn’t necessarily give someone legal authority to manage your finances. That’s one reason it’s also important to have the right estate planning and power-of-attorney documents in place.
9. How Often Should You Update Your Financial Emergency File?
Your financial life isn’t static, so your emergency file shouldn’t be either.
Choose a date each year to review it. You might use your birthday, the beginning of the year or another date you’ll remember.
During your annual review, check whether you’ve:
Opened or closed financial accounts
Changed jobs or retirement plans
Changed insurance policies
Bought or sold a home
Changed financial advisors, attorneys or tax preparers
Changed passwords or your password-management system
Named new beneficiaries
Changed an executor or power of attorney
You should also revisit the file after major life events such as a marriage, divorce, birth or adoption, death in the family or significant change in your health or financial situation.
You don’t need to rebuild the entire file every year. The point is simply to make sure the map still leads to the right places.
10. Have This Financial Emergency Conversation With Your Partner and Aging Parents
Once you’ve organized your own financial life, make sure the people closest to you have a plan, too.
If you share finances with a spouse or partner, you should both understand how your household operates. That’s particularly important when one person typically handles most of the money.
And don’t stop with your own household.
If you have aging parents or other loved ones you may someday help care for, ask whether they’ve created their own financial map.
One way to make that potentially awkward conversation easier is to start with yourself:
“I’ve been organizing all of my financial information so the family could find it if something happened to me. Do you have something like that?”
You’re no longer asking your parents to reveal their finances. You’re asking whether they’ve created their own map.
Final Thoughts: Give Your Family a Map Before They Need It
In his special edition podcast “An Honest Conversation About Death and Finance,” money expert Clark Howard explains his direct approach:
“I have always been pretty matter-of-fact about this… I prepare for [death]. My wife is 15 years younger than I am and in her family women live to 100 years old or older, so I’ve always thought about making financial decisions … so that she is okay when I’m gone.”
Many people don’t like thinking about what would happen if they became seriously ill, incapacitated or died unexpectedly. But organizing this information now can be a tremendous gift for the people you love.
And remember that you don’t have to hand anyone the keys to your financial life today.
Instead, you just need to create the map, store it securely, and tell someone you trust where to find it.
Check out our free Clark.com Financial Emergency File printable to help you get started.
The post Don’t Wait for a Crisis: The Financial Checklist Your Family Needs Now appeared first on Clark Howard.