If you manage your own investments, even if it’s only a portion of a larger portfolio, you should have a plan in place. All too often we see situations where a loved one passed away unexpectedly and left a messy situation for the spouse to deal with. The following points, summarized from a Morningstar article, explain what the DIY investor should have ready.
Create a Master Directory:
create a list of all accounts and include account numbers, passwords, etc. It is very easy for some small account to fall to the wayside and disappear.
Draft a short form Investment Policy Statement:
include these bullet points – from Morningstar:
- How much you can safely spend each year without running out of money
- Which accounts to tap for living expenses on an ongoing basis
- The basics of required minimum distributions and which accounts require them
- Which accounts to tap as a last resort or that you have earmarked for heirs
- An outline of the three or four most important financial-planning tasks you handle each quarter and each year (Forget anything that’s in the category of “nice to do”; stick to the basics.)
Automate what you can:
Whenever possible, automate processes. Make sure RMDs go automatically and directly to the bank account.
This step involves consolidation of accounts with similar registrations and reducing the number of holdings. Accounts with 30-40 holdings can create a lot of confusion.
Tip: Include these notes in the 25 documents you need before you die.