Building a Personalized Disaster Plan for Clients—Pt. 1: The Documents

When educating your clients on things such as the need for identity theft protection, it wouldn’t hurt to also throw in some education on “personalized disaster planning.” In light of Hurricane Irene, which is likely to impact the East Coast this weekend, and disasters that have struck America in the last decade such as tornadoes in Alabama, Oklahoma and Missouri; hurricanes in Louisiana, Mississippi and Alabama; flooding of the Mississippi River, and forest fires or mud slides in California, Arizona and New Mexico, it’s apparent that we all need some personalized disaster planning. 

Most advisors do a wonderful job researching investments and strategizing over portfolio risk management, but many of us forget to help our clients with other areas of their lives, such as risk management, that are as critically important to our clients' financial well-being. 

Therefore, in Part One of my personalized disaster planning series, I’d like to discuss the important documents that will always be needed by clients (and advisors, for that matter), regardless of the specific form of destruction or devastation that you encounter.

  • Identification:  Most of us have probably never been in a situation where we literally have no identification to prove who we are when prompted to do so. Many people in the tornado-destroyed areas had no driver’s license, Social Security card, birth certificate or marriage license. The lack of said documents could make life very difficult when trying to revive your life after a complete devastation and get back to normal as you know it. Remember: identification is the driving force behind everything we do in our day-to-day affairs.     
  • Documentation of Ownership: Deeds and/or titles to land, homes, cars, boats, etc., are all documents especially needed when forced to prove that you owned your home or car for insurance claim purposes. In my opinion, it would be very difficult to file insurance claims on property that has been completely blown or washed away with no evidence of the damage available for assessment. Therefore, the need for documented ownership may be at issue at some point in the claims process if the asset is no longer present.
  • Personalized Legal Documents: I cannot begin to comprehend the emotional and total lifestyle devastation that a tornado, flood or hurricane would have on a person’s life, much less the additional effects from a family member being killed in the process. Sadly, then, the question becomes “Do the surviving members of the family have a copy of the deceased’s will?” Did the deceased member even have a will? What if a family member is seriously injured and incapacitated? Does the family have a copy of the Power of Attorney, the Living Will and/or Medical Proxy? 

    Obviously, it’s extremely important to have these documents in the first place, and then for family members and other key advisors to have copies of these personalized legal documents should tragedy strike.
  • Proof of Insurance Coverage: Whether it’s homeowner’s, auto, health, life, disability, long-term care or an annuity insurance contract, all insurance coverage policies and/or supporting documents are of immense importance in post-disaster situations. Reviewing homeowner’s insurance coverage is something of yearly importance that I highly recommend
you relay to your clients, as new personal property assets or even structural additions often happen. Having full knowledge of their coverage and the supporting documentation will always help expedite the claims process, especially in a time of devastation, while also assuring they get the full benefits of their insurance coverage.

  • Tax Returns and Financial Account History:  Most often in disaster-stricken areas, there are tax relief efforts announced and enacted by state and federal governments for the citizens of the affected areas. That relief, in some cases, allows for carry-back deductions with regard to casualty losses, resulting in the need for historical tax return retrieval. Taxpayers are only allowed to amend back three years; however, I highly recommend keeping from five to seven years of documented, filed tax returns, due to statute-of-limitation issues. Whether tax relief deductions are allowed to be carried back or not, there is still the need for past tax return retention should a historical audit be requested by the IRS. This also could bring forth the need for all financial account histories such as bank accounts, credit card accounts, and even investment account statements, as taxes and finances collectively intermingle.

Business disaster planning in the wake of 9-11 has improved dramatically; however, the need for personalized disaster planning within our own families has been somewhat overlooked in the whole process. It’s unfortunate that it often takes a natural disaster to force us to open our eyes and realize not only do our clients need financial advice but they also need help preparing for when disaster strikes.   

In my next article, I’ll address issues of concern and the possible effects of not having a disaster plan in place; and will conclude with ways your clients can achieve their own personalized disaster plan.

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See all three blog postings by Andrew Rice on how to build a personalized disaster plan for clients.

Another AdvisorOne contributor, Gary Raphael of ACE Private Risk Services, recently wrote another timely disaster planning blog on ensuring that clients don't confuse home market values with rebuilding costs when it comes to their residences.

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