Why the Death Binder is becoming an essential part of estate planning

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In many couples, one spouse is responsible for finances and household management, so counselors encourage these spouses to create “death folders” to help surviving family members understand how things are going.

David Bernie, a certified financial planner (CFP) with Ryan Lamontagne Inc. in Ottawa, compares the “death folders” to the manuals Airbnb hosts leave for their guests, with information about Wi-Fi networks and garbage collection. The folder contains useful information, including a contact list, details of family assets, collectibles and bills, and even important information like how to turn on emergency lights in the event of a power outage.

“We encourage people to have these folders,” says Mr. Bernie. “It’s important that both spouses understand how things work in a household. Some spouses have six bank accounts and four credit cards, but only one spouse knows that. That’s not a bad thing – it’s just that one spouse didn’t know everything they owned.”

Matthew Kempton, portfolio manager at Verecan Capital Management Inc. in Halifax, calls these folders a natural evolution of estate planning.

“Once the will and power of attorney are drawn up, clients need to compile the information into a booklet so that the executor knows where to find everything and can begin organizing the deceased’s affairs,” he explains.

Death records folders are flexible because people write down and update information as they remember it. First, the folder should include where the will is kept, followed by details of burial and funeral arrangements, says Mr Kempton – including whether or not the deceased paid for a funeral in advance and, if not, instructions on their wishes for their final farewell.

Many clients make the mistake of only including funeral arrangements in the will, he notes. But what happens if the executor can’t find the will immediately? Mr Kempton has heard of cases where the executor made all the funeral and burial arrangements without knowing the deceased’s plans.

More and more clients are including a letter with their will folders outlining their wishes, explaining why they made certain decisions in the will, notes Mr Bernie. The aim is to avoid family disputes. He says a client may, for example, choose to leave more assets to one of their children than to the other siblings. A letter provides an opportunity to explain the reasons for the decision.

“It helps when people write things down,” says Mr Bernie. “You don’t have to agree with it, but it helps defuse the situation with the family.”

Although a letter of wishes is helpful, Mr Kempton recommends that his clients discuss their intentions with the beneficiaries.

“You don’t necessarily get to decide when you die, and if nothing is arranged and there are no discussions, it can cause quite a bit of chaos in the family,” he says.

Christine Van Cauwenberghe, head of financial planning at IG Wealth Management in Winnipeg, points out that executors used to have to receive bank and investment statements and other relevant information by mail. Today, online statements are preferable to paper statements, which can complicate matters even more if the executor does not have passwords to access online accounts.

Other considerations are personal. She says guardians caring for young children would appreciate a letter from the deceased parents outlining their intentions and offering advice.

“It’s helpful to understand what’s important to them, and many of these issues aren’t addressed in the will,” says Ms Van Cauwenberghe. “How do they want their children to be raised? What are their expectations regarding religion, education and extracurricular activities?”

If the deceased was a sole proprietor, the surviving relatives often do not have sufficient documentation about the company or its customers and suppliers, she adds.

Other gaps include information about digital assets such as cryptocurrencies, social media accounts and passwords, photos in the cloud and subscriptions, she says.

“The executor needs to know what needs to be kept,” she says.

In the case of overseas clients, Mr Kempton says, proof of citizenship is another important piece of information that can get lost.

“This document is important, especially if you are filing a final tax return in the U.S.,” he says. “There are additional complexities and filings required.”

Small life insurance policies, particularly those taken out when the deceased was a toddler or young adult, are another missing element. Mr Burnie points out that many families took out these policies decades ago and may receive a modest tax-free death benefit.

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