One of our most popular client seminars that we present on a regular basis is, “What Happens When You Die: What your trust now does for you and your loved ones.” In this seminar we speak at length about all of the steps a person must take now, while they are alive and have the mental capacity, to ensure that their affairs are in order when they pass away.
I often explain to clients in this seminar that death is like an inevitable storm that is on the horizon, and each day we live, the storm gets closer and closer. The issue for each of us is whether we are going to be prepared when the storm hits. Will we be wise and take the time to build our “house” upon a sturdy foundation, or will we be like the foolish man who built his house upon the sand? When the storm strikes, the foolish man’s house will wash away, but the wise man’s house will stand firm and provide him and his family with much needed protection. Like the wise man, there are many steps that we all need to take today so that when the storm does hit, our loved ones are as prepared as possible to deal with the tragedy that has just struck them. They should then be free to be occupied with what is most essential - remembering and honoring the loved one they have recently lost.
One of the items we stress is a Contingency Day Checklist. This checklist, if done correctly, will enable your loved ones to focus on the loss they have just experienced and not be worried and stressed over the huge task of wrapping up your estate. It gives them a game plan that they can follow very easily in step-by-step instructions.
One of the items we cover on the checklist is to make sure that you write down all of the combinations to your secured locations and all of your passwords to your computer accounts. You want to make sure that you have instructed your Trustees as to where they can find all of your important legal documents. They need to know where you keep your estate planning documents. They should know where to find other important papers, such as tax records, business papers, life insurance polices, deeds, and investment records. Your goal is to make things as easy and simple as possible when you pass away. You do not want to leave a mess that your loved ones have to unravel when you are gone.
One of our recommendations to our clients is to make sure that they clean out all of their old documents. Get rid of old bank statements, deeds, life insurance policies, and tax records. In the August 10, 2012, IRS Summer Tax Tip 2012-16, the IRS has given us some very good guidelines on what to keep and how long to keep these items for both individuals and business owners:
- What to keep – Individuals: In most cases, keep records that support items on your tax return for at least three years after that tax return has been filed. Examples include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks or other proof of payment and any other records to support deductions or credits claimed. You should typically keep records relating to property at least three years after you’ve sold or otherwise disposed of the property. Examples include a home purchase or improvement, stocks and other investments, Individual Retirement Account transactions and rental property records.
- What to keep – Small Business Owners: Typically, keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Also, keep records documenting gross receipts, proof of purchases, expenses and assets. Examples include cash register tapes, bank deposit slips, receipt books, purchase and sales invoices, credit card charges and sales slips, Forms 1099-MISC, canceled checks, account statements, petty cash slips and real estate closing statements. Electronic records can include databases, saved files, e-mails, instant messages, faxes and voice messages.
- How to keep them: Although the IRS generally does not require you to keep your records in any special manner, having a designated place for tax documents and receipts is a good idea. It will make preparing your return easier, and it may also remind you of relevant transactions. Good recordkeeping will also help you prepare a response if you receive an IRS notice or need to substantiate items on your return if you are selected for an audit.”
If you don’t take the time to clean up your files today while you are alive and still have the mental capacity to do it, your loved ones will be the ones burdened with the task of doing so, which creates great inefficiencies in the administration of your estate.
Remember, you created your estate plan for one reason - to make things as simple and easy as possible for the loved ones you leave behind. One of the greatest things you can do to ensure that happens is to make sure your estate is in order prior to death.
Contributed by MH Arrowhead Estate Planning Attorney and Partner David T. Eastman
About Morris Hall:
At Morris Hall, we have focused our legal practice on estate planning for over 40 years. Along with estate planning, our attorneys help clients and their families with matters of probate, trust administration, wills, power of attorneys, business planning, succession planning, legacy planning, charitable gifting and other important legal aspects. We also have divisions in financial, real estate and accounting to help you incorporate all of your planning together, ensuring that everything works perfectly for your needs and situation. Our Arizona offices are located in Phoenix, Mesa, Scottsdale, Tucson, Prescott, Flagstaff and Arrowhead. Our New Mexico offices are located in Albuquerque, Las Cruces and Santa Fe. Contact us today at 888.222.1328 to schedule an appointment!
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.