Personal Record Retention Top Ten
If you were to become incapacitated or die, would your agents, trustees or personal representatives know where to find the key to your safe deposit box? The title to your car? Or, your account numbers and passwords? If not, it is time to start compiling your personal records. By compiling this information in a central, secure location, you can better ensure that your estate plan will be carried out efficiently. For some people, this will mean compiling mostly paper files. For others, it will mean keeping a detailed list of digital assets and passwords. Below is a list of the top ten types of records you should print out or save in digital format. These items should be kept in a secure location separate from your computer, but in a place that can be accessed by your representative upon your death or incapacity.
1. Personal Information. Compile a list of your personal information and the personal information of your beneficiaries, including full legal names, addresses, phone numbers, email addresses, and dates of birth.
2. Cash/Investment Accounts and Safe Deposit Boxes. Keep a print copy of at least one recent statement for all checking/savings/money market/brokerage accounts listing the financial institution, your personal banker/investment advisor, and your account number. Keep a list of the location of all safe deposit boxes, safes, vaults or other storage locations holding your personal effects or important documents and note how the agent can gain access to such devices. If you have a safe deposit box, you may want to formally add your agent to the access card at the financial institution where such box is located so that he/she may gain access more efficiently.
3. Real Estate. Keep copies of lease agreements, title policies, and property insurance policies for all of your real estate.
4. Partnerships/Closely Held Business Interests. Keep copies of partnership/operating agreements and bylaws, buy/sell agreements, and stock certificates.
5. Life Insurance and Retirement Plan Assets. Keep a print copy of at least one recent statement for all of your retirement accounts listing the custodian, your advisor, and your account number, a copy of each of your life insurance policies, and all beneficiary designation forms and/or letters confirming your current beneficiaries.
6. Loans/Notes. Keep copies of any document reflecting a significant liability owed to you or by you, such as promissory notes or other loan documents.
7. Estate Planning Documents. Compile your estate plan, including your Will and/or trust, marital property agreement, powers of attorney, HIPAA authorization, Living Will, funeral form, and any funding information (if any), including any tangible personal property lists you have executed. If your original documents are kept separate from your book of copies, we recommend that you note the location of the originals on the copy book.
8. Tax Records. Copies of your income and gift tax returns, along with the supporting documentation used to compile such returns, employment tax records, and other information used to compile any tax return or related document filed with the IRS. How many years' worth of returns/supporting documents you should keep depends on the type of action, expense, or event that the document records. Generally, you should keep your records supporting an item of income or a deduction taken on a tax return until the period of limitations for that return expires. In general we recommend 7 years. But capital asset basis expenses should be kept for 7 years from when the asset is disposed of.
9. Digital Files. Keep an inventory of your digital assets and the login/password information for all of your accounts and devices (such as your computers, tablets and mobile phones). This may include usernames, passwords, answers to security questions, domain names, email accounts, photo/video sharing sites, blogs, social media accounts, and any other assets that cannot be identified by paperwork found in your home.
10. List of Advisors. Compile a list of the names, addresses, and contact information for your advisors, including your accountant, banker, attorney, insurance agent, financial advisor, clergy, and physician.
This information should be updated regularly and, at the very least, we recommend conducting an annual "check-up" to verify the information listed is still accurate. While this task may seem daunting at first, the more information you can compile for your agents, the less searching they will have to do when the time comes. This can save on costs and allow your agent to begin managing your affairs sooner and with less hassle.
Through the recent passage of the Achieving a Better Life Experience ("ABLE") Act, states may now develop programs allowing for the creation of savings accounts for persons with disabilities. These savings accounts will provide a mechanism for families to set aside funds to assist certain individuals with disabilities without affecting their eligibility for benefits. These accounts can only be established for individuals who are diagnosed with a disability prior to attaining age 26. The first $100,000 in the account will not be considered when determining Supplemental Social Security Income eligibility, and Medicaid eligibility will not be affected regardless of account value. Family or friends may contribute up to $14,000/year to any such account without incurring a gift tax. Withdrawals are tax free if they are used for qualified disability services. These accounts should be coordinated with other estate planning techniques specifically tailored for individuals with disabilities.
Estate Tax/Gift Tax Exemptions
Today's record-high estate/gift tax exemptions provide clients with great opportunities for transferring assets free of tax during life or at death. The increased exemptions coupled with the availability of the portability election (an election that allows a surviving spouse to use his/her deceased spouse's unused exemption) allows many clients the opportunity to simplify complex trust arrangements and replace them with trusts that include distribution plans specifically tailored to their family's needs rather than centered around tax planning.
* Wisconsin does not currently impose a separate state estate or gift tax.