“Death cleaning” is the literal translation of the Swedish word dostadning, which means an uncluttering process that begins as people age. There’s even a new book called “The Gentle Art of Swedish Death Cleaning,” by Margareta Magnusson.
Santa Fe New Mexican’s recent article, “How to ‘death clean’ your finances,” says the focus should be on jettisoning junk. However, most senior’s finances could also use a good death cleaning. Simplifying and organizing our financial lives can make things easier for us while we’re alive and for our family after we’re gone.
This task becomes more pressing when we’re in our 50s. Our financial decision-making abilities generally peak around age 53, researchers say, while rates of cognitive decline and dementia start to increase at age 60. As we get older, we may become more vulnerable to fraud, scams, unethical advisers and bad judgment. Here are some steps you can take:
Consolidate financial accounts. Fewer accounts are easier to watch for suspicious transactions and overlapping investments. You also may save on account fees. See if your employer will let you transfer old 401(k) and IRA accounts into its plan or consolidate them into one IRA. Think about exchanging individual stocks and bonds for professionally managed mutual funds or exchange-traded funds (investigate prior to selling any investments held outside of retirement funds). Move scattered bank accounts into one account, but note that FDIC insurance is generally limited to $250,000 per depositor per institution.
Automate payments. Memory lapses can cause missed payments, late fees, and credit score damage. This can drive up the cost of borrowing and insurance. Set up regular recurring payments in your bank’s bill payment system, have bills charged to a credit card and set up an automatic payment, so the card balance is paid in full each month.
Scale back on credit cards. Keep just two credit cards: one for everyday purchases and another for automatic bill payments. Closing accounts may hurt credit scores, so wait until you’re sure you won’t need to apply for a loan before you start cutting down on the plastic.
Assign a watchdog. Identify the person you want to make decisions for you, if you’re incapacitated. Ask your attorney to create two durable powers of attorney — one for finances and another for health care. You don’t have to designate the same person for both, but name backups if your first choice can’t serve. Consider naming someone younger, because someone your age or older could become impaired at the same time you do. Discuss where your agent can find the information and access.
Your emergency file. Create “in case of emergency” files that your trusted agent or heirs will need. The file can include the following:
- Estate planning documents, such as your will, trust, healthcare directives, powers of attorney, and living will;
- Birth, death and marriage certificates;
- Military records;
- Social Security cards;
- Car titles, property deeds and other ownership documents;
- Insurance policies;
- A list of your financial accounts;
- Contact info for your attorney, CPA, financial adviser, and insurance agent; and
- Photocopies of passports, driver’s licenses, and credit cards.
A safe deposit box isn’t the best spot because your agent may need access outside of bank hours. A fireproof safe or a locked file cabinet may be better, but share the combination or key (or its location) with your trusted person. Scan important papers and retain an encrypted copy in the cloud to help you or someone else recreate your financial life, if the originals are lost or destroyed.
Reference: Santa Fe New Mexican (December 18, 2017) “How to ‘death clean’ your finances”