The job of an executor is to secure and distribute assets of a deceased person pursuant to their wishes. These wishes are ideally spelled out within legal documents such as wills and trusts. While wills and trusts play an integral role in directing the assets in one’s estate, they do not typically address some of the most important questions the executor needs answered:
- How does the executor know what assets and liabilities you have?
- How can he or she access your accounts?
- Who are the financial professionals that you work with?
- Where do you keep pertinent information such as real estate records, life insurance policies, and automobile titles?
What Should Be Included in Your Paradise Letter?
Everyone should have a Paradise Letter that addresses the above questions to lessen the administrative burden on the executor. The letter can be very informal, is not legally binding, and should include the following information:
- A balance sheet summarizing all your assets (i.e. house, cars, investments) and liabilities (i.e. mortgage, credit cards).
- A list of accounts associated with your assets, liabilities, expenses, and income.
- A list of professionals that you work with, including financial advisors, estate attorneys, and accountants.
- Your will and trust (if applicable).
- Real estate records and vehicle titles.
- Insurance policies.
Where to Keep Your Paradise Letter?
Wherever you decide to keep your Paradise Letter it is crucial that you communicate the location to your executor and ensure that they have access to it.
- Do store it on a secure shared drive with your executor.
- Do store it in a centralized location in your house that is easily accessible.
- Do not store it in a locked safe where you are the sole keeper of the safes code.
- Do not store it on your computer where you are the sole keeper of the login.
How Often Should You Update Your Paradise Letter?
As your life changes, so should your Paradise letter. Whether it is a new streaming subscription, gym membership, or credit card, most people’s financial situations are constantly changing. To ensure your executor isn’t left in the dark a good rule of thumb is to update your Paradise Letter on an annual basis at a minimum. Perhaps it is at year end, or when you prepare your taxes. Whatever you decide, make a plan and stick to it, as the smooth transition of your estate to your loved ones depends on it.
If you would like to read more about this topic, we found a couple of articles that may be of interest: