Like many professional offices, ours has gone electronic and mostly paperless – at least as much as an attorneys’ office can actually go paperless. So from time to time, a client will ask me whether and how we back-up our data and systems.
Thankfully, I can assure my clients that we have up-to-date, sophisticated off-site back-up systems.
But then I ask them the same question. “How do you back up your data?”
I’m not asking, by the way, whether they have their computer data backed up. Instead, my inquiry is directed at what’s inside of their noggin.’ By that I’m referring to the wealth of information that the client may have in their head, but that no one else knows – possibly not even their spouse.
What kind of data you ask? Think about all of the day to day decisions that you make regarding your legal, tax and financial matters.
What is your investment strategy? Where are the accounts? Which account is used to pay what bills? Are electronic banking accounts used? What are the usernames and passwords? When you need to pay big-ticket items, such as real estate taxes, or for major repairs, what money do you tap?
When do you typically take your Required Minimum Distribution (RMD) from your IRA every year? Is it at the end of the year? Who calculates it? If there are multiple IRA and 401(k) accounts, is the RMD taken proportionately, or do you typically tap one of the accounts and leave the others intact?
Are there any financial dealings between you and your adult children? Are those arrangements written down? Where are they kept? Do they involve ledgers? Are those ledgers up to date? Who keeps them up to date?
Are there annual gifts being made for health or education? Are those expected to continue? Are there life insurance premiums due? Are those premiums paid to a life insurance trust that requires Crummey notices that must be sent to the trust beneficiaries? Who is responsible for that?
The list goes on and on.
Because handling the finances of the house is so second nature to some, and because they have been doing so their entire adult lives, they don’t think that any of this is extraordinary. They don’t appreciate that someone coming in with no understanding of what they have done over the course of many years would have a difficult learning curve to understand what has transpired in the past, and what has to happen in the near term to keep things running smoothly.
And in most cases, there is no back-up. All of this information is stored in the noggin – but if that noggin should have a traumatic event like a stroke, or worse, death, all of the loved ones who are affected by these daily decisions somehow have to reconstruct the data.
Believe me, it ain’t easy.
So if any of this sounds familiar, what should you do? The first thing, of course, is to write down as much of the information and keep it in a safe place. Secondly, instruct those around you about the most important legal, tax and financial matters you deal with on a daily, monthly or yearly basis. Then have your loved one participate with you in carrying out some of these tasks. That way, should your loved one be confronted with having to pick things up should you be unable to act, it all won’t seem so foreign.
In other words, do your best to back up the data that sits between your ears. Then be sure to perform periodic back-ups since the data tends to change over the course of the months and years.
©2014 Craig R. Hersch