When COVID first hit, like a lot of people, I began to think about my own mortality in a new light. Here was this unknown illness that was striking people down. What if it were to happen to me?
What I felt wasn’t so much a fear of my own mortality, but worries about what would happen to my family if I were no longer here. I have a good term life insurance policy, but that was just one piece of the equation.
What about our accounts? Does my wife Sarah know where everything is? What if we were to both pass on? Would our children’s guardians know where everything is? Could they access all of those accounts?
Worries stick in your mind until you take action to fix them.
The basics of life documentation
Life documentation is simply the recording of all of your key financial and personal account information in one very secure place to make things easier for your loved ones in the event of your untimely passing. Often, putting together such documentation shows you lots of little maintenance things that should be done, such as adding a new family member to an account.
What about security?
The first question to ask about something like this is security. How can a document like this be secure?
The best approach is to divide the information you want to pass on into “secure” and “non-secure” piles. Which pieces of information do you want to keep secure? Passwords are definitely in the “secure” pile, especially for financial information. Other pieces of information likely need less security. For example, knowing that you have an account at say, Fidelity, is something that someone observing your mail could figure out.
For information that you want to keep safe, you’ll want to devise a very secure method for storing that information and protecting your accounts. One method is to use secure password management software such as 1Password, paired with a very long master passcode. Within that software, you can store and organize passwords for all of the relevant accounts, along with relevant notes on each account. Then, focus on storing the master password for your password manager securely by giving that code to a lawyer or storing it in a known secure place.
The less secure information can be stored in a more easily accessible document, such as a printed document or an easy-to-access digital document.
Physical or digital storage — or both?
Physical and digital storage each have advantages and disadvantages.
Physical documents are the easiest to access and use later. On the other hand, they’re much harder to keep updated, meaning that you often have to reprint or rewrite sections of the document. For security, the best strategy with physical documents is to keep the most sensitive information in a small document in a highly secure place, with the less-sensitive information in an easier-to-access place.
Digital documents are much easier to update as you go along, but may be difficult to access and use later. You might choose to digitally store a document on a memory stick, for example, and update it regularly by just plugging in the stick and copying over a fresh document. With security, a good strategy is to have the most secure elements under some form of passcode protection as described above with a password management tool.
Who should know about it?
For less secure information (like a reminder to close a Netflix account, for example), a document stored with other core belongings that several people in your life know about is fine.
For more secure information (like the passwords for your key accounts), you should consider storing that information in a secure place. A good approach is to discuss this with a family lawyer or to use a safe deposit box. If you’re using a password manager for much of your documentation, the key thing to be stored is simply the passcode for that password manager.
Who should know about this information? A family lawyer is a good choice, as is your partner. Your executor and other core family members should know to contact your lawyer in the event of your passing to access those documents. For physical items (like documents or a memory stick), you can store them in a home safe or a safe deposit box at a bank, as long as your partner and your lawyer know the location.
How to get started
The first step in creating a life document is to simply list all of your accounts from which financial transactions occur, as well as all significant assets you own. For some, this may be a long list. You can do it on a computer or with pen and paper, as you prefer.
If you need help figuring out what to include on this list, Charles Schwab offers a great template for making a list of your assets. For your financial accounts, start by listing your bank accounts, investment accounts, and credit card accounts, then use those statements to generate a list of other accounts as your statements will show you where money is coming from and going to.
It’s important to recognize that this is a living list. Over time, you’ll open new accounts and close old ones. Those changes should be reflected in this list, so you’ll want to establish a habit of updating this document regularly.
What should you store?
There’s a simple rule to follow when making a list like this: If you’re not sure whether to include it, include it. Put everything in this list, so that your survivors don’t have to look for anything when cleaning up the accounts and assets you left behind.
Here’s a checklist to help you get started. For each of these, be sure to include account numbers and online login information.
- All of your bank accounts
- All of your credit card accounts
- All of your investment accounts
- All of your other debts, such as mortgages and car loans
- All of your insurance policies (life insurance in particular, but other insurance that’s in your name)
- All monthly services that you pay for, such as your cable bill, your Netflix account, your utilities, and so on.
- All assets you own that have more than nominal value (real estate, vehicles, collectibles, art, and so on) and where to find them
- All debts owed to you and points of contact
- All outstanding business interests and points of contact
As you are doing this, consider whether each of these accounts and assets are currently up to date with proper beneficiaries and other details. Do you still need this account? Is there a good password on the account? Are there any changes that need to be made? Ask this for each account and asset you add to the list. You may also decide during this process that having a better overall plan is a good idea, in which case contacting a certified financial planner might be a good move.
Scheduling an annual appointment on your calendar to update this list is a good idea.
My own life documentation
My life documentation is stored in a few ways. My less private documents are stored in a folder in a safe in our home. It does not include sensitive information, such as passwords. With that documentation, I also have estate documents as well as a letter to my executor.
For account information, I have logins, passwords and some other relevant information for each account stored in a password manager. The master code to get into that password manager is very complex and is written down in two secure locations. The instructions for how to use it are in with the less secure documentation, but the password itself is stored very securely.
I also keep a slip of paper in my wallet that identifies people to contact in the event of serious injury or death. The people on that paper know enough to get the ball rolling on these matters.
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