Our firm handles estate planning, not financial planning. However, to effectively help our clients, we often need them to create a good personal financial. Sometimes this is for an estate planning client who needs a good list of assets to fund a revocable trust. Sometimes it is for an adult child who is trying to get their parent’s finances in order or trying to decide how to pay for long term care. Sometimes clients who are business owners need a financial to use when considering a sale or other transaction. This article explains how we recommend our clients go about this, and includes an Excel template we’ve found to be helpful.
Understanding personal financials
A personal financial is simply a list of assets and debts that are owned (or owed) by a person or couple as of a given date. At its simplest, it can be a sheet of notebook paper that lists accounts and values. Other personal financials are much more complex and include businesses and hard to value assets.
What to include on a personal financial depends on what it will be used for. A business owner might create one every year because it is required by their bank. An estate planning client might create one to understand the assets that would pass to someone else in the event of their death. An adult child may create one for their parent to help manage the parent’s affairs. Our template is designed to capture the key information that will always be necessary, and includes a notes field for additional information that might be important for a particular use.
Using our template
Our template has two sheets. The first sheet (titled “example”) is just an example that illustrates what a completed sheet might look like. The second sheet (titled “template”) is a blank template to be filled out. The green areas are to be filled out by the person creating the financial. The spreadsheet includes categories and totals. Feel free to add rows for additional assets or to delete extra rows or categories that do not apply. The totals should all still calculate automatically.
The first category is real estate. The description would typically be what it is (“primary residence”) and the address (“123 Main Street”). For the value, generally the best approach is to simply fill in your subjective idea of what you could sell the property for. Tax assessed value is almost always low. If the property has recently been appraised, use that value unless there is some reason to believe it is wrong. If the value is important, explain where it came from in the notes field. If you are creating a financial with supporting documents, documents, add the tax bill and any appraisal to the stack of supporting documents.
The second category is business interests. The description should be the name of the company (“XYZ LLC”). If there is more than one owner, the description should note the owner’s interest (“40% interest”). Value again will be subjective. In some businesses the value is the value of the assets on the balance sheet. In others there is an owner’s opinion of the likely sale price or a business valuation. If this value is important, explain where it came from in the notes field. If you are creating a financial with supporting documents, documents referenced in the value used (such as a balance sheet or business valuation) should be added to the stack of supporting documents.
The third category is retirement accounts. The description is the institution holding the account, the type of account, and the last four digits of the account number (“Fidelity 401(k) x3052”). If this is a joint personal financial, also note the name of the spouse who is the record owner of the account (“Tom’s Fidelity IRA x3045”). The value of retirement accounts should come from a statement. If you are creating a financial with supporting documents, add the statement to the stack of supporting documents.
The fourth category is other financial accounts. These are financial assets that are not retirement accounts or bank accounts (think annuities, life insurance, savings bonds, or brokerage accounts). Again the description should be the institution holding the account, the type of account, and the last four digits of the account number (“Vanguard brokerage x2302”). For married couples, also note how the account is titled (“Joint Vanguard brokerage x2302” or “Bob’s Vanguard brokerage x3340”). Again, take the value from a recent statement. Some life insurance and annuities will have a cash value and a death benefit. Use the cash value for the value and note the death benefit in the notes. If you are creating a financial with supporting documents, add the statement to the stack of supporting documents.
The fifth category is bank accounts. This is checking, savings, CDs, and money market accounts held in a bank. Again, the description is the titling (if married), the type of account, and the last four digits (“Joint Associated Checking x3444”). The value should be taken from a recent statement. If you are creating a financial with supporting documents, add the statement to the stack of supporting documents.
The final category is vehicles and personal property. For vehicles, the year, make and model are the description (“2017 Honda Accord”). Use the private party bluebook available from kbb.com. Personal property is typically only included if there is personal property with significant market value (artwork, toys, etc.). If you are creating a financial with supporting documents, add the bluebook printout or any other valuation documents to the stack of supporting documents.
Next is debts. Debts are either secured or unsecured. A secured debt is attached to a piece of property (for example, a home mortgage or a car loan). An unsecured debt is a personal obligation unconnected to any property (for example, a credit card or personal loan). For each debt, list the name of the creditor and last four of the account number (if applicable) in the description (“Associated home mortgage x3033”). The value of the debt should be taken from a recent statement. If you are creating a financial with supporting documents, add the statement to the stack of supporting documents.
Beneficiaries and Titling
In some cases, it is important to be sure that beneficiaries are properly assigned to various assets. In that case, request the beneficiary form on file from the institution. Note who the beneficiaries are in the notes column and add the beneficiary form to the supporting documents.
Income sources
Monthly income, such as social security or pension income, is not an asset or debt and generally would not be listed on a personal financial. However, in some cases we ask for income information. In that case, social security income should be noted by recipient (“Bob’s social security”) and the most recent amount. Other sources should be listed by recipient and source (“Bob’s Ironworkers Pension”). Do not include RMDs or other transfers from retirement accounts that are already listed as an asset. Add a recent statement for pension income to the supporting documents.
Conclusion
Your personal financial is now complete! Feel free to remove the highlighting to make it look prettier.
Even for people who keep a great personal financial in their mind, we’ve found that this exercise is a useful one. For those who don’t, this can be very helpful. We hope this template and article are useful, and look forward to assisting you in creating this financial. If you are a current client and need help, feel free to set a time to sit down with your assigned paralegal and work on this together.