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Wednesday, December 23, 2015

De-Cluttering Your Life: Improve the Ease of Estate Administration, Part Two

A consistent comment  we hear from our clients goes something like this: "I want things to be easy for my family with a minimum of hassles when I pass away."  What people sometimes fail to understand is that the degree of difficulty and hassle faced by the family when administering an estate is often directly proportional to the number and types of assets that are owned by the decedent at the time of death.

In the last newsletter I discussed ways to simplify your estate by discarding or giving away personal property, memorabilia, and "stuff" that you may not need or use anymore.  In this article I will discuss financial assets and investments.

As life goes on we tend accumulate wealth in a variety of forms and types.  Examples of financial and investment assets include: cash on hand or in safe deposit boxes; checking and savings accounts at banks or credit unions; investment or brokerage accounts; mutual fund accounts; retirement accounts including IRAs, Rollover IRAs, SEP IRAs, Simple IRAs, Inherited IRAs, Roth IRAs, 401Ks, annuities, 403Bs, and government pensions or retirement plans; escrow accounts; personal promissory notes receivable; commodity accounts; and business accounts.  To further complicate matters, stocks, bonds, ETFs, index funds, and mutual funds can either be held in a brokerage account or in a separate account for every separate investment.  Some people still have stock certificates, EE bonds, I bonds, and gold coins in safe deposit boxes.  Others own DRIP (dividend re-investment program) accounts for individual publicly traded stocks.

Every asset owned and every different custodian or financial institution involved creates a potential for inconvenience for your successor trustees and personal representatives.  Therefore, the greater the number of accounts or investments held at the time of death, the greater the time and trouble for your family.  

Here are some suggestions to help you simplify your investment holdings.

Hold Your Financial Investments in a Brokerage Account.  Holding original stock and bond certificates makes estate administration more difficult because they are not easily liquidated or distributed to family.  Publicly traded stocks and bonds should be held in a brokerage or investment accounts. Brokerage accounts can also invest in thousands of different mutual funds and may hold gold and other commodities.  Rather than creating different accounts for different mutual funds, put all the mutual funds into your investment accounts.

EE Bonds and I Bonds can be held in a Treasury Direct Account and monitored online, rather than holding individual certificates.  

If you are concerned about brokerage fees or costs, select a low cost brokerage company to hold your stock, bonds, and mutual fund assets.

Consolidate Bank and Credit Union Accounts.  If you have multiple bank accounts and credit union accounts, try to consolidate your holdings into fewer accounts.  Sometimes our clients are holding just a few hundred dollars in a dormant credit union or bank account.  Consider closing accounts that are not being actively used.  FDIC insures bank accounts up to $250,000 per account.  If you have a bank account titled in the name of your living trust, FDIC will insure the account for $250,000 for each beneficiary of the trust.  If the trust is a joint trust with your spouse the FDIC insurance is doubled again.  A couple with two children is insured up to $1 million per account held in a living trust.  (2 spouses x 2 beneficiaries x $250,000 = $1 million)

Consolidate Brokerage Accounts.  Consider holding all investments at one brokerage company or investment firm.  This will simplify your paperwork now and reduce the work for your successor agents, trustees and personal representatives.  Clients tell me that they have investments held at multiple brokerage firms because they don't want to put all their eggs in one basket.  One brokerage firm doesn't necessarily mean that all of your eggs are in one basket.  You can have your eggs in multiple investment baskets that are warehoused under one roof with one investment company.  

Consolidate Retirement Accounts.  Most people who have held multiple jobs over the years have accumulated a number of IRAs, Simple IRAs, Rollover IRAs, and 401Ks.  Talk with you investment advisor to see if you can consolidate any of these accounts.

For most people it isn't feasible to reduce all of their financial holdings to just one or two accounts or with just one or two banks or investment companies.  However, it is rare that some closing and consolidation can't be reasonably found.  Even closing one or two bank or brokerage accounts will simplify things for your successor trustees and personal representatives.  You might find that it also simplifies things for you.

We will discuss what to do with treasures, art-work, and collectibles in our next Newsletter!

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