Forensic Accounting: Barbservations and Recommendations

 

For most financial bloggers, their “best” posts reflect real life experiences with learning lessons for themselves and their readers. So it is with this post that describes recent steps taken to help settle my late brother’s estate. I write from the perspective of a next-of-kin relative.

 

Forensic accounting is defined by Investopedia as “a combination of accounting and investigative techniques.” While generally used to investigate financial crimes (e.g., embezzlement), it can also apply to exploring the finances of a deceased person following their death. For three full days earlier this year, I used my skills as a certified financial planner® to practice forensic accounting.

 

Below is a brief description of process steps that I used and recommendations for Money Talk readers to seriously consider implementing to reduce post-mortem hassles for loved ones:

Process Steps to Do Financial Forensic Accounting

 

Gather Resources- Review the deceased person’s financial filing system. My brother, for example, used hanging folders in a home office desk that were organized alphabetically by the name of product or service providers or by a description of specific documents. It took six weeks to find his digital assets inventory so data from online sources was not immediately available.

 

Construct a Net Worth Statement- Expect this to take time. It took me two full days to hunt down documents related to my brother’s assets and debts and calculate an estimated net worth. Tools that I used included bank statements, a checkbook register, and tax records (e.g., 1099-R form for IRA withdrawal). Later, with access to his devices, e-mails and texts were also helpful.

 

Cast a Wide Net- Check out possible sources of additional assets and income. For example, I did a search with MissingMoney.com to see if there was any money being held by New York State in his name. Sadly, there was not. I did, however, notice small deposits for royalties on his book and sponsored advertising on his website. Prior year tax returns also provided useful information.

 

Recommendations to Reduce Hassles For Loved Ones

 

¨   Prepare a list of digital assets and give it to trusted parties with a brief overview explanation

¨   Share the location and filing system for your legal and financial documents with trusted parties

¨   Prepare a “When I Die” folder with a draft obituary and list of tasks to be performed after death

¨   Update a net worth statement (assets – debts) annually and place it in the “When I Die” folder

¨   Make a list of beneficiary, Payable on Death, and Transfer on Death (POD/TOD) designations

¨   Prepare an autopay inventory by making a list of bank accounts or credit cards that bills are charged to

¨   Alert family about 2-factor authentication (2FA) on accounts so they keep cell service active

¨   Teach PC-using heirs how to navigate Apple devices or Apple-using heirs how to navigate PCs

¨   Teach heirs how to navigate unfamiliar e-mail and account logins (e.g., 2FA and security keys)

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.