Although none of us want to think about man-made and natural disasters, you have to face the reality that if there were an emergency, you may only have a few minutes to evacuate your apartment or home. Worse yet, you could have a health scare that shines a high, intense beam on the fact that you do not have your paperwork in any kind of discernable order, even if the paperwork actually exist.
Being prepared is key; what you keep on hand—and where and how you store important papers—is something everyone needs to not just think about, but implement a realistic plan.
“Natural, medical, and criminal disasters and emergencies involve randomness; we need to be prepared to be affected because of the disastrous impact such an event would have,” said Jean-Luc Bourdon, CPA/PFS, principal of BrightPath Wealth Planning, LLC and a member of the AICPA’s Personal Financial Planning Executive Committee who is a strong advocate for this topic.
Still, many young CPAs may not think they need this advise, either because they haven’t yet started a family or don’t think they own that many assets that need to be documented. For Bourdon, a health scare in his early thirties scared him straight.
“I learned my lesson when an emergency physician told me I might have cancer. When I told him that, statistically, it was highly unlikely, he answered that statistics don’t apply to individuals. As it turned out, I didn’t have cancer, but since then, I’ve had my essential documents in order with disability insurance, life insurance, and an emergency kit. These documents are important at any age and are just as important as health and car insurance.”
Bourdon’s suggestions apply young CPAs and anyone else who has not given this much thought. This is also good information to pass to your clients, employers, colleagues, and friends.
“Although important documents should be kept in a fireproof and waterproof safe at home, having and protecting important documents is one thing, but it’s not enough,” he said. “Copies of these documents should be kept in a safe and separate location. A safe deposit box at a bank is one option. However, technology allows encrypted records to be kept on the cloud and are always accessible no matter where you are.”
Important legal documents include:
• Birth certificates and adoption papers
• Marriage licenses and divorce papers
• Social security cards
• Green cards and naturalization papers
• Will and trust documents
• Power of attorney and healthcare directives
• Vehicle registration papers
• Real estate loans and deeds of trust
• Copies of past tax returns
• Financial account statements
• Insurance documents, including property, rental, auto, and life insurance
• Health insurance information
Bourdon acknowledges that creating and maintaining these kinds of documents requires quite a bit of upfront work—and there certainly is a cost involved, but he insists that this is time and money well spent, especially with the following documents:
• Healthcare directives and HIPPA release form. “These documents allow someone else to make medical decisions your behalf when you can’t do it for yourself.”
• Power of attorney. “This allows someone else to make financial decisions for you.”
• Will. “A will and possibly, a trust, will provide instructions to distribute your property when you die.”
Bourdon also advises that beneficiary designations for retirement accounts and life insurance policies cannot be overlooked.
“It’s also important to thoughtfully choose the people you designate,” he said. “For example, I advise clients to designate two persons for healthcare decisions: a loved-one and someone else who’d be the backup if decisions become too emotional for the loved-one to handle. Getting things done on someone else’s behalf is rarely without challenges. You may also want to consider a professional trustee as executor of your will—someone who is independent and experienced can be very helpful.”
“For a young CPA, it is not uncommon for most assets to be in qualified plans such as IRAs and 401ks. Also, a young CPA is likely to have life insurance. These assets get distributed independently from the will. Therefore, beneficiary designations could control the distribution of most assets.”
His last piece of advice is made up of common sense, yet can be very quickly overlooked or forgotten: Keep your list of people to contact in case of emergency so it can be easily found in your purse, wallet, or on the fridge.”
For additional resources, Operation Hope provides an Emergency Preparedness Financial First Aid Kit, while the Federal Emergency Management Association operates Ready with detailed plans for disaster awareness along with timely disaster information.
Have you or your family ever been displaced from your primary residence because of a man-made or natural disaster? Tell us a story and send it to email@example.com. We’ll consider featuring your story in an upcoming Edge article and will contact you if we decide to use it.