Spring cleaning your financial records

If you’re anything like me, spring cleaning is a welcome annual occurrence. Getting everything cleaned and organized gives me a sense of refresh and order. However, others may see this as more of a necessary evil. Regardless of your outlook on such tasks, when it comes to your financial documents, neglecting your annual financial “cleaning” could cost you more than a few extra dust bunnies.

Once someone has a Last Will and Testament or General and Medical Powers of Attorney completed, the paperwork is typically hidden away in a file, never to see the light of day until a dreadful event happens. For most people, if you've taken the time to complete this paperwork at all you are ahead of the game.
However, there are many more things to consider other than those few documents. How did you title those checking and savings accounts you opened years ago? Which beneficiaries are listed on your retirement accounts and insurance policies? Do you only have primary beneficiaries listed, or contingents as well? Have you made these updates to all of your accounts? Not only can these things be troublesome to correct, but they can also become quite costly.

Bank account titling
This one can trip up a lot of people, especially if you have had your accounts for a long time. There are various ways to title accounts, and understanding what each one means can help you to determine which is best for your situation.

Joint with Rights of Survivorship: If one owner dies, the other owner receives all of the remaining funds in the account. This is typically the most common type of joint account, simply because it is the easiest. All owners have full and unrestricted access before death, and the surviving owner receives the balance after death of the first owner.

Joint with Tenants in Common: Tenants in Common means that both parties have full and unrestricted access to the contents of the account. However, once one owner dies, the other owner is only entitled to their half. The other half of the assets reverts to the estate of the deceased. Probate may be required to free up the deceased owner's half of the funds. In a husband and wife situation, it’s best to opt for the joint with rights of survivorship account if the ultimate desire is to leave the surviving spouse all assets. Also if those assets will need to be accessed to pay for expenses (i.e. ongoing household or living expenses) prior to a probate type hearing to free up the deceased owner's half, the JTWROS is the way to go.

Payable on Death account: one person solely owns the funds in the account, and another person (beneficiary) will own the funds after the first person's death. This is for a taxable type of account, not retirement accounts. But in theory, it's like setting up a beneficiary on a taxable account. (Some financial institutions call this Transfer on Death. Either titling is fine, as they both mean the same thing).

Updating your beneficiaries
Beneficiaries on your IRA, 401k, and other retirement type accounts: It’s more common than not to leave your spouse as the beneficiary on your retirement accounts. In fact, if you chose to leave someone else, your spouse usually has to sign off on it. It’s also important to update that information when your status changes.

If you are employed, your HR department will probably be one of the first to know of your situation change due to a spouse’s death, or divorce for that matter, and begin preparing the paperwork to update your file. Now, while your employer knows of this change pretty quick, your financial advisor, insurance agent, or bank typically won’t hear about it until you call. Make a note in your documents file to add them to the “to-do” list and make that call. While you may be on great terms with your ex-spouse, do you really want them to get your 401k when you kick the bucket?

Beneficiary on life insurance: Again, an often overlooked call. While having your beneficiary updated on all paperwork is quite important, if you have listed a contingent beneficiary on your documents, you can buy yourself some time.

Rights of Survivorship
Vehicle registration, car insurance and ownership change: This is one that really tripped me up! While most couples have their vehicle titled in both names, and may even have the right of survivorship listed on the title, there are still some things you need to know. 

To renew your registration, both names listed on the title must also be listed on the proof of insurance. Well, at least in Texas. So if your registration is about to come due, renew it prior to removing the jointly titled name from the insurance policy. This will buy you some time to make the necessary changes to the title for the next year.

It’s also a good idea to make sure you have a right of survivorship listed on your vehicle title. If you don’t, download the form, sign it, and keep in your files. For Texas residents this is a Rights of Survivorship Ownership Agreement (TX Form VTR-122), and does not need to be filed. (Well, that’s the current rule). Just file it away with your other important documents. Read more about vehicle titling here.

Wills & Powers of Attorney
Odds are you probably aren't going to have to change this each year. At least I hope you won’t have to change it every year… But it isn't a bad idea to at least take a peek at it every few years to make sure nothing has changed.

I hope this helps you establish your own checklist of things to clean up each year. As always, for any estate questions for your particular situation, it’s best to seek the advice of an estate attorney or professional.

Want to see more ideas about saving money? Check out my other posts on The Money Dietand follow me on Facebook.

Photo by ratch0013. Published on 16 March 2014
Stock photo - Image ID: 100248271


  1. A few of these have made it onto my goals list for the next year. Thank you for the wonderful information!