Getting Your Financial House in Order   Recently updated !


No one likes to think about their demise.  However, like Ben Franklin’s ubiquitous saying goes, nothing in this world is certain except death and taxes.  This Viewpoint is a practical warning about steps you need to take, or need to have your elderly parents take if you are fortunate to still have them with us.

Without proper planning, successor trustees or executors could spend 6-9 months of their lives dealing with dozens of insurance companies, mutual fund providers, brokerage firms, and transfer agents in charge of dividend reinvestment programs (DRiPs).  Each firm has its own terminology, policies and procedures, and paperwork.  Many of these forms need to be notarized, have signatures guaranteed, or even have them “medallion guaranteed.”

Fortunately, there are steps you can take to spare your successors from this nightmarish scenario.  First, look for ways to consolidate like-titled accounts in as few locations as possible.  Put all the trust assets, jointly-titled assets, or assets in an individual name with a single brokerage or bank custodian.  Similarly, put each accountholder’s IRA accounts under one custodian.  These can all be held by the same custodian.

Mutual funds and stocks held by the issuer (such as DRiPs) should be deposited into a brokerage account.  This greatly eases administration of an estate rather than having to deal with several brokerage firms, mutual fund companies, and stock transfer agents.

When a client dies, we can typically re-title a trust under the name of a successor trustee in just a few days after we receive a death certificate.  If we have the current version of the trust on file, we will need the successor trustee’s personal information and signatures on a few forms to re-establish control over the account.  It is even faster with less paperwork when transitioning an account to a joint accountholder who survives the other joint holder.  Contrast this simple process with the many months it can take a successor trustee to deal with the different paperwork requirements of numerous different service providers.

Several clients have established “memo” accounts with us for ease of eventual estate administration.  “Memo” accounts are a unique Provident term applied to accounts technically under our control, but which we don’t manage or charge for.  In the event a client dies, these memo accounts are as easy to administer as the ones Provident actively manages.

Many people like to diversify their bank providers in order to minimize the chance of losing access to their money in the event their bank is shut down by regulators.  Stories of a few large banks shutting down during the Great Recession still burn in our memories, but this is an infrequent situation.  If you honestly think your bank isn’t strong enough to survive, maybe it’s time to move your account to a stronger institution.  Try to avoid the temptation to open accounts with many institutions – it can be tough to keep track of which bills are paid out of which account, and it becomes much more difficult on your heirs.

Make sure your accounts are properly titled.  If you have a trust, make sure your accounts are titled in the name of the trust.  Many times, we’ve seen clients retain accounts titled in an individual name or held jointly with a spouse even after paying for a trust to be created.  Sometimes there are reasons to do this, such as holding an account to be owned by the joint account owner rather than being included in the estate.  However, in most cases it is simply a matter of inertia.

Avoid holding accounts exclusively in the name of one individual unless there is a “transfer on death” (TOD) feature.  Property held outside a trust and without a joint owner or beneficiary will generally require an executor approved by the Probate Court.  A TOD directs the custodian to transfer ownership to the beneficiary (or beneficiaries) in the event of the primary accountholder’s death.

Review your IRA and TOD beneficiaries once a year.  Fidelity lists IRA beneficiaries on Form 5498 that is provided to each client annually, typically during the first quarter of the year.  If you would like to change beneficiaries, let us know and we will update them for you.  Look into this for your other accounts as well.  Once the accountholder dies, the beneficiary designation is nearly impossible to change.

And more recently, “digital assets” have come into play.  These can be Facebook pages with your memories, or a Walgreens or Snapfish account where you’ve uploaded your photographs.  What about email accounts where statements and bills might be sent?  Provide someone you trust with your user IDs and passwords for certain accounts, so your family can access these accounts if you are not able to.  If privacy is a priority, consider placing this information in your safe deposit box, or alongside a will or trust document.  Many service providers will terminate access to online accounts that are inactive for an extended period of time.

Certain accounts, like online bank accounts, may not issue statements.  Make sure there is a record of these accounts for a successor trustee or executor.  Avoid using these accounts to make automatic payments as these can continue after death if the successor doesn’t know about their existence.

This article might sound like a pitch to move more assets over to Provident.  While we don’t mind more business when we can add value, many times there are old assets that aren’t candidates for active management because of very high capital gains tax consequences if they were sold.

If you have a range of different service providers, look to consolidate through a Provident memo account or with another provider of your choice.  You will be doing your successors a great service.

Death is admittedly an uncomfortable subject.  With some thought and input from Provident, your estate attorney, and your accountant, your assets can be properly administered according to your wishes and with much less hassle for your heirs.  I know you would want it that way.  Let us know if you need our help.

Scott D. Horsburgh, CFA