Creating A ‘Red Folder’ of Key Data Can Aid Loved Ones, Peace of Mind

A few years ago, my sister came to stay with my children for the weekend so my husband and I could fly off to celebrate our anniversary. While I didn’t consider our decision to fly together to be risky, I let my sister know the location of a very important folder in case something happened to us.

This treasure trove of personal and financial data is something that everyone should consider creating as a storehouse of vital information.

Ours included: the location of our will and living trust documents, contact information for our attorney and accountant, a list of our life insurance plans with policy numbers and contact data, bank account numbers, a listing of all our investments, the code to unlock our smartphones, the login for our home computer and to our password manager, information on our mortgage and the location of the deed to our house, safety deposit box location, credit card account numbers and any outstanding loans or other financial commitments. We also included a letter to our children that shared our hopes for them and our intentions in setting up financial accounts for their benefit.

Pulling this together took time. It was also a bit emotional. My husband and I put it off until a few weeks before the trip, so we had to buckle down to get it done in time. That said, once we had everything organized and showed my sister where she could find this information (as well as telling my parents and in-laws), it was a tremendous relief. I was surprised by how happy it made me to have this done.

Having worked in wealth management for close to 20 years, I have seen multiple situations where a family member dies unexpectedly and the family is left scrambling to figure out all the parts of that person’s financial picture on top of grieving. This is a frustration that could have been avoided entirely.

At Altair Advisers’ 2021 spring forum, Leave Nothing to Chance: Proactive Planning for Longevity, neuropsychologist and wealth consultant James Grubman shared that his family keeps a red folder updated with all important financial data in a known location at his home. When he started this organizational project, he chose an empty folder that happened to be red. Now his wife and adult children all know its existence and location, and a review of its contents is part of their annual meeting on family financial matters.

For security purposes, choose a discreet location with care. Having so much confidential information in a single place may feel unsettling to you, but online storage or safety deposit boxes can present their own security risks and access difficulties. Balance the “red folder” risk against the far greater chance that some important data or assets could be lost or inaccessible if you don’t create this centralized inventory.

To help you build your own red folder, Altair has an Asset and Financial Inventory workbook that outlines key categories of information. It is located here. We can provide direct assistance to clients in gathering and completing this inventory. Additionally, Altair’s financial planning team can review and give suggestions on ways to update your financial structures to best fit your financial intentions and preferences.

This work takes some time, but the end result will be a gift to your family. While you’ll discover things that need to be updated and adjusted, don’t let those details bring the project to a halt. Perfection is not required!

Completed or not, make sure you let your family members know about the existence of this file. Even if you are not yet having in-depth discussions on your financial holdings, you are at least providing your family members with the location of critical information should it be needed. Not only can it save them hours of additional stress, you may find, as we did, that the mere act of compiling a red folder brings you peace of mind.

The material shown is for informational purposes only and should not be construed as accounting, legal, or tax advice. Altair Advisers LLC is a registered investment adviser with the Securities and Exchange Commission; registration does not imply a certain level of skill or training. While efforts are made to ensure information contained herein is accurate, Altair Advisers cannot guarantee the accuracy of all such information presented.