In many couples, one spouse runs the finances and manages the household. For that reason, advisors are encouraging these spouses to draft “death binders” to help the surviving family members make sense of how things work.
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David Bernie, certified financial planner (CFP) at Ryan Lamontagne Inc. in Ottawa, likens death binders to the manuals Airbnb hosts leave for guests with information about WiFi networks and garbage collection. The binder contains useful information including a contact list, details of the family’s assets, collectibles and bills, and even necessary tidbits such as how to turn on emergency lights during a power outage.
“We encourage people to have these binders in place,” Mr. Bernie says. “It’s important for both spouses to understand how things work in a household. Some spouses have six bank accounts and four credit cards but only one spouse knew that. It’s nothing nefarious – it’s just that one spouse didn’t know everything they own.”
Matthew Kempton, portfolio manager at Verecan Capital Management Inc. in Halifax, calls these binders a natural progression of an estate plan.
“Once the wills and powers of attorney have been drafted, clients need to gather information in a booklet so the executor knows where to find everything and start the business of organizing the deceased’s affairs,” he says.
Death binders are fluid, as people jot down and update information as they remember it. The first thing in the binder should be the will’s location, followed by details about funeral and burial arrangements, Mr. Kempton says – including whether or not the deceased prepaid for a funeral and, if not, instructions on their vision for their final sendoff.
Many clients make the error of only including funeral arrangements in the will, he notes. But what happens if the executor can’t find the will right away? Mr. Kempton has heard of cases in which the executor took care of all funeral and burial arrangements without knowing the deceased’s plans.
More clients are including a letter of wishes in their binder, which explains why they made specific decisions in the will, Mr. Bernie notes. The aim is to avoid family squabbles. For example, he says a client may choose to leave one of their children more assets than the other siblings. A letter provides the opportunity to explain the rationale for the decision.
“It helps when people write things down,” Mr. Bernie says. “You may not agree with [it] but it helps to soften the situation with the family.”
But while a letter of wishes is helpful, Mr. Kempton encourages clients to discuss their intentions with their beneficiaries.
“You don’t necessarily get to decide when you die, and when things aren’t in place and there’s no discussions, it can create quite a mess with families,” he says.
Christine Van Cauwenberghe, head of financial planning at IG Wealth Management in Winnipeg, notes executors used to wait to receive banking and investment statements and other pertinent information in the mail. Now, online statements trump paper, which can make things more complicated if the executor doesn’t have passwords to access online accounts.
Other considerations are more personal. She says guardians who will care for young children would appreciate a letter from the deceased parents outlining their intentions and offering guidance.
“Understanding what’s important to them is helpful and a lot of those issues would not be addressed in the will,” Ms. Van Cauwenberghe says. “How do they want their children raised? What are their expectations in terms of religion, education and extracurricular activities?”
If the deceased was a sole proprietor, surviving families often don’t have enough documentation about the business, clients and suppliers, she adds.
Other gaps include information about digital assets such as cryptocurrency, social media accounts and passwords, photos in the cloud, and subscriptions, she says.
“The executor needs to know what needs to be cancelled,” she says.
In the case of cross-border clients, Mr. Kempton says proof of citizenship is another key piece of information that may go missing.
“That document matters, especially when filing a final return in the U.S.,” he says. “There are additional complexities and filings required.”
Small life insurance policies, specifically ones purchased when the deceased was an infant or a young adult, is another missing element. Mr. Burnie notes many families purchased these policies decades ago and a modest tax-free death benefit may pay out.
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