In New York and other locations, individuals planning their estate must make important decisions about how they want their assets and finances managed if they die or become incapacitated. An essential component of preparing for financial transition involves an emergency financial file that walks a spouse or an executor through how to prevent financial chaos and take over your affairs.
A repository for critical information
In a time of crisis, your loved ones will need to access your personal financial information to take over managing your finances. An emergency financial file is a document that should contain this critical financial information.
Financial planner Dave Ramsey recommends including a cover letter for your financial file, whether you keep it on paper or electronically. It acts as the table of contents to describe what your loved ones can expect to find. For example, your emergency financial file might contain:
- Your will and estate planning documents
- Names and contact details for your executor, healthcare and financial or durable power of attorney
- Account numbers and passwords for any account with money in it and your full name as stated on the account
- Account numbers, due dates and payment amounts for credit cards, mortgage payments and similar accounts
- Retirement account information, such as IRA or 401(k) account numbers and login details
- Contact details for your emergency contact and people you want to be notified of your death
- Bank account numbers and passwords
- Contact information for insurance companies and financial institutions
- Contact details for your CPA or accountant, attorney and any other professionals that help manage your finances
Having all the necessary information together helps prevent delays in accessing funds that your loved ones might need to cover your mortgage payment and other time-sensitive expenses.
The financial file should receive a review and update each year to make any changes to new bank accounts or credit cards, other payment accounts, new insurance or annuity accounts and other important financial details.
Adds clarity to your directives
You may have completed a will and set up a trust, but an emergency financial file provides a secure place to leave more in-depth directions on your wishes for distributing your assets. You may also want to leave letters for each family member that must only be read if something happens to you.
Lends peace of mind
If you should become incapacitated or die unexpectedly, your spouse or another trusted individual may find themselves scrambling to locate bank accounts, credit card bills, and estate planning documents.
You can spare others the stress of locating all the information by keeping it together in a secure emergency financial file. This central information repository can provide some relief during a very stressful time.
Preparing an emergency financial file can bring you security and provide your loved ones with a financial lifeline for your affairs.