Writing in the Boston College Center for Retirement Planning Squared Away blog, Great Barrington financial planner Luke Delorme advises that everyone consolidate their retirement, investment and bank accounts. “I have clients who came to me with a dozen accounts spread across multiple banks,” he says. “Primary checking, primary savings, money market, CDs, an account for the kids, and so on.”
The result, Delorme says, is that it’s difficult to have a clear financial picture. One of the first things his financial planning firm does for clients is to help them consolidate their accounts so that they have a single retirement account and a single investment account. That way, they can better understand their financial situation. It also makes it much easier to implement a financial and investment plan. As Delorme says, moving “accounts to a single custodian makes it easier to track investments and monitor performance.”
This is also an argument for establishing a revocable trust. Revocable trusts only work to avoid probate and provide incapacity protection if they are funded. That means that investment and bank accounts need to be retitled in the name of the trust. We find that in doing so clients follow Delorme’s advice, establishing a single bank or investment account for the trust, and closing out the myriad other accounts they may have accumulated over the years.
A Gift to Your Children
This is also a great favor you can do for your children or other heirs. It will make it much easier for them to manage your affairs if you become incapacitated or upon your death. Rather than having to go from bank to bank and investment firm to investment firm establishing their credentials under a durable power of attorney or as personal representative of your estate, they can interact with a single bank or investment company (or perhaps one of each). And if you’ve already named them as co-trustee, they’ll already be on your accounts, making it even easier for them to step in when the time comes.
Just be aware that you cannot transfer your retirement accounts into your revocable trust; they need to stay in your name. But it still makes sense to consolidate any IRAs and other retirement funds you may have into a single account as Delorme recommends. In addition to making it easier for you to manage your investments and withdrawals, it will mean that your beneficiaries will need to deal with a single account and financial institution rather than several.