Money Matters: Managing important documents

Have you ever needed to find a document only to realize it is not where you filed it? Perhaps you filed it away to keep it safe, only to determine it is so safe even you can no longer find it. Missing documents can lead to added legal, tax, and investment expenses, and thus staying organized is crucial and can be beneficial.

While we always preach the importance of organization to our existing clients and encourage our new clients to take time to get onboard the "organization train", problems still occur. We are often faced with helping our clients resolve both small and large issues. Here are some of the issues we have assisted in resolving or have been aware our clients have faced over the years.

Most of you know the importance of having a Will, and yet many of you still lack this important document. Without it, the laws of your resident state forces your estate to distribute the assets subject to probate in accordance to the law and not your wishes. The lack of a Will can financial impact your spouse and children and not always in the manner in which you may desire. If you have a Will, it should be current! If you make specific gifts to particular heirs, you should review these gifts occasionally to make sure the gift or recipient is still appropriate. Leaving family heirlooms to the brother-in-law who
has now divorced your sister and left her with six kids to raise may no longer be the best move.

While most attorneys draft documents to allow for changes, your document may lack flexibility, or a change in your life may have occurred that was never anticipated. One of our clients took in her sister’s child to raise and her own children were already grown. Her Will lacked the ability to provide for this new child in her care should something happen to her. Clearly to avoid another problem for this child, our client needed to revise her Will. Divorce is probably the most common change that necessitates revisions in your Will. Many states have chosen to enact laws to redirect assets going to an ex-spouse when the intent would generally be to distribute those assets to the children of the decedent. You should not count on state laws though to properly hand out your belongings.

It is certainly beneficial to keep your estate documents organized where they can be located when needed and up-to-date.
How about investment documents? Can this area also benefit from organization? The answer is clearly yes. For those of you who like to hold your stock certificates, this could be costly if one of your certificates were lost. By holding stock certificates, there is no monthly statement being generated showing that you actually own the shares. If the company does not pay a dividend, then there are no tax records to indicate to anyone that you own shares in that company. Should you pass away or become incapacitated, the value of those assets may be lost forever. If someone were to determine you owned the shares, there is a fee to replace lost certificates. That fee is generally two percent of the value represented by the certificate, thus it could get very expensive.

Additionally, lost certificates or poor recordkeeping generally translate into missing cost basis information. In the event you
need to sell the shares, the lack of basis information may cause you to recognize a higher profit/gain or less of a loss on the
shares when sold resulting in the payment of more taxes than perhaps required. Almost every year at least one of our clients is having to research years of records to determine the cost basis in shares they sold during the year and purchased prior to having their account with us.

Similar stories can be shared about life insurance. After a death, generally ALL of the boxes in storage are reviewed, and most of the time the survivors finds any number of old life insurance policies. The quest begins to determine which if any are still in force and may have a benefit to be paid. In my experience, it is not just one or two, but usually three or four policies that are tracked down. Occasionally, one or more may still have a benefit. But, most of the time the result is hours of tracking down old companies that have changed their names or were sold, and then from one department to the next only to determine the policy was cancelled years earlier.

Save yourself time and perhaps money, and get organized. Most likely, you will see the benefit of getting organized. Certainly, your family will appreciate your efforts at organization if you are no longer around to answer their questions. If you have areas of concern in the planning process, please contact us at Quality Financial Concepts.


Would you like a response to a financial question? Send your question to Doug Horn, 115 W. Broadway, Maryville TN 37801. Be sure to mark your envelope Money Matters.

Doug Horn, CFP, is an area financial planner with more than 24 years financial experience and founder of Quality Financial Concepts, located in downtown Maryville on Broadway.

Doug Horn, CFP, Registered Investment Advisor in Tennessee and Texas and Registered Principal, Branch Office of and Securities offered through CUE Financial, Member NASD, SIPC.

© 2007 All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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