Financial

The Death File And Why You Need One

Life has a way of throwing us curveballs and throwing us into emergency situations when we least expect them. You might get in an accident and slip into a coma. Or you could catch a surprise illness that takes a sudden turn for the worst. Whatever the case may be, having a death file for your loved ones to reference can make stressful situations a lot less chaotic.

The following is a guest post from Steve, aka Paper Tiger, and a long-time Financial Samurai reader. A near-death experience this summer prompted him to create a detailed “death file” so that his wife and daughter would be better informed about all the family’s financial details, including assets invested, taxes, expenses/paying bills, family trust, and more.

What Is A Death File?

A death file is a binder, folder, spreadsheet, and/or document(s) that contains all the information a loved one would need in the event of your incapacity or passing. It can be in physical or digital form based on personal preference. Depending on your circumstances, it could be as simple as one piece of paper or as lengthy as a book. A death file is also commonly referred to as an in-case-of-death-binder or simply a death binder.

Although nobody likes to think about when we may inevitably kick the bucket, preparing for your passing with a death file is an act of love and responsibility. Anyone who has had a loved one pass unexpectedly and had to settle their affairs can surely attest to that.

Examples of critical items that should be included in a death file include:

  • Last will and testament
  • Trust documents
  • Beneficiary designations
  • Estate attorney contact information
  • Tax accountant contact information
  • Instructions on where to access filed tax returns
  • Life insurance policy account numbers
  • Prepaid funeral and/or burial contracts
  • Burial instructions
  • Deeds
  • List of all financial accounts – banks, retirement plans, credit cards, insurance, loans, investments, etc.
  • Account info for all other bills – cable, phone, internet, utilities, gym, etc.
  • Reference list of doctors, medications, medical release forms, etc.
  • Login and passwords list
  • Any other pertinent information about your life, assets, liabilities, responsibilities, and wishes.

Get Serious About Creating A Death File

In July, 2021 I had a health scare that pushed me to get serious about creating a “Death File.” The short version of the story is that I woke up one morning with a stomach ache and soon after, began throwing up and also had a bad case of diarrhea.

I thought it was just a stomach bug, but as the day progressed, I got weaker and weaker and very dehydrated. By the late afternoon, I could not lift my head off the pillow without passing out so I immediately knew this was something more serious.

We called an ambulance since I was not able to get up to go to the car. When they arrived, they tried several times to get my blood pressure and it was not registering. I assume because it had dropped dangerously low. When they finally got a measurement, it was 50/41.  

By the time I got to the ER, they did some blood work and discovered my kidney function was down to 25%. It turned out, I had a very bad bacterial infection and I was going into toxic shock. My organs were shutting down.  

I spent 5 days in the hospital on constant IV multi-spectrum antibiotics, which eventually cleared up the infection.  They never were able to isolate the exact cause of the infection. But their treatment plan worked and I have fully recovered.

Related: The Cost Of Calling An Ambulance And The Nightmare That Ensued

Make Things Easier For Your Loved Ones

In our family, I have always managed the investments, paid the bills, and organized our tax documents. My wife has not shown interest in keeping up with any of this. So the records I put together now will be very important for her and our daughter if they ever have to take over my responsibilities.

The two key items that outline everything we have are on an Excel spreadsheet with several tabs, and a Word document that spells out various instructions and helpful information. I keep all of this information on two USB thumb drives.  

I keep one working drive at home that I update frequently. And I keep the other in our safety deposit box. At the end of every year, I update the drive in our SD box with the latest information and then put it back. A few years ago, I only had one thumb drive and I somehow managed to lose it and had to re-create everything. I learned the importance of having a secure backup the hard way. Don’t make my mistake!

Create A Death File Spreadsheet

Our death file Finances Excel spreadsheet is the main repository where all of the key information is stored. I utilize multiple tabs to keep things organized and easy to update. I’ve listed the various tabs I use below, which you can use as a template and customize to your own needs.

Passwords

This tab has login information for every significant account we need to access. These include my computer, company deferred savings accounts, retirement accounts including 401K and Pensions, brokerage accounts, TreasuryDirect savings bonds, CDs, money market accounts, Angel investments, and private equity investments.

It also includes info for our daughter’s 529 account, our family revocable trust, wills, powers of attorney, life insurance, health insurance, checking and savings, home equity LOC, my mother’s financial information as I help manage her affairs, and medical information.  

I also include websites for credit cards, rewards programs, airline miles, homeowner’s association, ATM, and important numbers like Social Security, driver’s license, passport, memberships, etc.

Social Security

This tab lists out all of the career earning information for my wife and me with a reference to the SSA website and password where more information can be accessed. I check this once a year to make sure everything is correct regarding annual income information.  

Related: When To Take Social Security? Make So Much It Doesn’t Really Matter

Net Worth  

This is an important tab because it lays out all of our assets individually and how to access them. I update it monthly with the latest values. For example, I have a summary of the total amount in each 401K, brokerage account, private equity account, 529, Bonds, etc. Then I also list out the individual investments in each account and their corresponding value.  

Obviously, all of this is available in the online statements and I could always use an app to consolidate everything, but I have manually tracked it this way for years. I’m old school and a creature of habit.

One thing I can readily admit is that our portfolio is way too diversified and complicated. I hope to work on simplifying our investments over time as we move from accumulation to preservation. This should help ease the level of management required by my loved ones down the road.

* If you prefer automated tracking, Personal Capital is a great free app to monitor your net worth.

Beneficiary  

This tab lists every financial account we own that requires a beneficiary and who that person is. I check this regularly because I have found over time that this information can go missing in certain accounts and needs to be updated.  

For example, if your company changes plan administrators for your 401K, this information may need to be re-entered on the new system. I usually review this once a year for every account.

College Savings Account (529)

My daughter graduated from college in May, (Yea!), and for the last 4 years I have kept a file on every qualified expense we paid for from this account for tuition, room & board, etc. I figure this will be very helpful if we are ever audited. My wife would have no idea where to start without this. I also have a hard and soft copy of all receipts from this file.

Related: Why You Should Have A Separate 529 Plan For Each Child

Expenses

This is another critical tab in my death file spreadsheet because my wife has not paid a bill since we’ve been married, (28 years and counting). Here I track each day and month’s expenses by category.

I note every fixed expense and when it is due so that anyone looking at this could easily take over. I also track the dates and amounts of monthly income so we can balance cash flow each month. 

Home Improvement

Like you, I want to keep as much of my home equity as possible when we go to sell our primary residence at some point and not let Uncle Sam get any more than he requires. Every home improvement expense we have incurred that can be used to offset the future capital gain above the qualified exemption is captured in this file.  

We have lived in our home for 17 years and have made quite a few improvements over the years. Having everything recorded is a very helpful reference, especially since my wife hasn’t been involved in any of these affairs.

Mom/Parents

Some of you may be involved in your parents’ finances, which is important to include instructions for as well. I track all of my mother’s expenses and cash flow to make sure she is good on a monthly basis. I also help with her investments as well as those for my Mother-in-Law.

Tax Prep

This is where I manage the documents we need to provide to our CPA each year. Here I list out any account that has paid out a distribution or loss as well as the W2 information regarding our income for the year. 

I also track the K1s we need to submit from our Private Equity investments as well as all of our deductions so this information is easily at the fingertips.

Every brokerage account that files a 1099 is also listed and how to access those documents online. Due to the complexity of our tax returns, the information here is really critical.

Safety Deposit Box

This tab lists the contents of everything in our Safety Deposit Box which includes collectible coins, art appraisals, key documents, tax returns, estate plans, house and car titles, personal documents like marriage license, passports, insurance documents, etc.

Death File Instruction Manual Word Doc

As mentioned, apart from my death file Excel spreadsheet, I also have a Word Document which serves as the written “Instruction Manual” for how to do things related to our finances and expenses.  

While the Excel spells out the numbers, the Word document is a written explanation of everything in the spreadsheet and more. I also update this regularly. It is now up to 18 pages which might seem like a lot but it is, after all, a summary of 28 years of our financial lives spent together.

What To Do And How To Do It

As stated, the Word Document is written instruction of “what to do” and “how to do it.” I start out with a detailed explanation of the information in the death file, what is in the Safety Deposit box and how to access it, which would be the starting point after I am gone.  

Much like in this document, I talk about the thumb drives and explain everything that is important in keeping up with our affairs. I list out a description of every investment, pre-tax and post-tax, explain what it is, how to get to it, who to contact, etc. There is some redundancy, but I think that is probably a good thing.

I also include a detailed “contact list” so my heirs have someone to call if they have a question about a particular asset, expense, taxes, pension, Trust, investment, or home maintenance need. In addition, I go into a pretty thorough explanation of our taxes and the timing of various forms and filings that need to be done every year. Because we have 10 Private Equity investments, I also explain the process of managing cash calls and dealing with K1s.

Next, I have a section on how to transfer assets to heirs and explain important details about our Revocable Family Trust. And I highlight the importance of filing life insurance claims early and what to do.

I also have a significant section on how to pay bills since this will be a significant task for someone doing it for the first time. When you’re putting your instructions together, don’t forget to include annual and irregular expenses like home and car insurance, property taxes, homeowner’s dues, charitable contributions, alarm monitoring fees, etc.

Related: The Best Age To Get Life Insurance Based On Logic

Take The Time To Create A Death File

So, there you have it. That’s the gist of how I put together my death file. There is clearly more than one way to skin this cat. But these are the ideas and information that I used to prepare my family to deal with our affairs once I am gone. These continue to be dynamic documents that I will update regularly to the bitter end.

When my father passed, I helped my mother settle his affairs. We were fortunate that he provided good information and instructions for me to follow. Things would have been so much more difficult without his preparations, especially since my mother wasn’t involved in their finances.

And thankfully, I recovered from my health scare and was able to put together my own comprehensive death file instructions that can help my family settle my own affairs sometime down the road.

I wish you all the best in preparing your own death file. Your loved ones will certainly appreciate the efforts you go through to prepare them for the inevitable.

Paper Tiger has been an avid reader and frequent commenter on FS for the past 5 years.  He retired at 57 after a successful 35-year medical device executive career with a low 8-figure net worth.

Related post: Three Things I Learned From My Estate Planner Attorney Everyone Should Do

Readers, have you settled the affairs for a lost loved one? Did you have a death file to use as a reference? For those of you who have created death files of your own, how did you go about it? What other suggestions do you have for those looking to create a death binder?

Source
The Death File And Why You Need One is written by Financial Samurai for www.financialsamurai.com

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