A parent’s passing can happen at any time, even if their health seems perfectly normal. Following the funeral comes the tedious and often emotionally draining task that you wish you hadn’t avoided while they were alive: sorting through their personal belongings.
“It’s very hard on a family [because] where do you start? What do you have to do?” said Eileen Trost, president of the Chicago Estate Planning Council, and a partner at the Chicago law firm Freeborn & Peters.
“When you know your parents have three file cabinets full of papers, and you have to go through everything, it’s an incredible time waster,” Trost adds. “Sometimes, someone will pass away, and three years later, you find an insurance policy. It’s very hard to know that you found everything.”
The first order of business includes finding the location of your parent’s life insurance policy.
Sounds easy enough right?
Not when you were never told where your parent’s stored their important papers. Estate planning experts recommend looking through your parent’s mail.
“Most insurers send annual statements. So watch the mail coming in for at least a year,” said Trost. “Look for receipts over a period of time. That’s usually where things will show up. Also, about half of my clients have locked file cabinets or metal boxes at home. Look into those things … look into places where they squirrel away important documents.”
Check your parent’s safe deposit box or make a call to the person who wrote their will. You can check the website of your state’s treasury; most will let you input your name to see if things such as an unclaimed life insurance policy will show up in the system. You might also want to contact their insurance agent or their attorney, suggests Trost.
While your parents may have retired years before they died, Trost says it’s still a good idea to check with their old employer. With employer-sponsored life insurance, there might not be an annual statement mailed to the home and they can at least send you in the right direction, she says.
Also, don’t overlook checkbooks, which can provide a wealth of information.
“Some people have automatic payment plans, where premiums are deducted from their checking accounts,” Trost explains. “Look at bank statements to see if there are payments going to a life insurance company.”
Another place to locate missing information is on your parent’s home computer, especially if they banked online. Unfortunately, online banking is considered fairly modern, which could pose a problem if your parents weren’t tech savvy. Trost also points out that you may need their account numbers and/or passwords in order to access the information.
If you don’t have the hours or inclination to investigate yourself, or you worry that you have missed something, some professional service companies will search for you. Of these, MIB Solutions and its Policy Locator Service is the most prominent.
The service is based on MIB’s fraud detection database, which is used by 450 insurance companies across the U.S. and Canada.
Policy Locator is capable of identifying life insurance applications that have been processed at MIB member insurers dating back to 1996. For a $75 fee per request, and a few other requirements, the company will search its database to see if your loved one had an application for life insurance, which may help you locate a policy that you didn’t know about. However, the Policy Locator Service can only locate individually underwritten life insurance applications.
“We have more than 170 million records in our database,” said David Aronson, MIB’s director of marketing. We are the only company with a database like this because of our industry-wide role in fraud detection at underwriting.”
Aronson says his company discovers the incidence of a policy application in about 30 percent of the cases, and it usually will have results within five days.
While discussions about death and life insurance can be difficult to talk about with your parents, experts says knowing key information can only make your life easier and help you reconstruct their financial life when they’re gone. It could be something as simple as asking your elderly parents not to throw away any mail for a year.
“Nothing should be a surprise to your children when you die,” says Catherine Theroux of the industry research organization LIMRA. “Communicating with your family on a regular basis about financial issues earlier rather than later is important, along with having a will.”
Steve Hartnett, the association director of education for the American Academy of Estate Planning Attorneys, says members of the academy usually give their clients a “Legacy Wealth Planning Portfolio” to keep all relevant information.
While the binder is a convenient way to organize all of the information, Hartnett added that any binder works just as well. But he urged people to make sure that they’re not overlooking anything.
Bear in mind, the payout you might have been expecting isn’t always there. In tough economic times such as these, sometimes people cash in policies before they die, especially if they need the money to pay for medical expenses, long-term care or to set up a trust for one of their beneficiaries, experts say.