by DeEtte L. Loeffler, J.D., L.LM, Taxation
Devastating wildfires may be in the near future for San Diego. According to the National Interagency Fire Center, San Diego County entered into a period of “above normal” fire risk in May which will continue through August. If you own a home in San Diego County, this may be a concern for you. With the exception of a few arson fires in the spring of 2015, most of which were quickly controlled, San Diego County has not experienced major wildfires since 2007. Hopefully, you have taken steps to reduce the risk of loss (such are adding a fire retardant roof and/or clearing foliage back from your house), but have you taken all the steps you should to protect yourself financially and legally?
Below are a few tips that may help you to be prepared in the event of a disaster.
Update Your Homeowner or Renters Insurance
If you have not looked at your homeowners (or renters) insurance policy recently, now would be a good time to do so. If you have bought new assets, inherited something valuable, or made improvements to your home, you might not be carrying enough coverage to rebuild/refurnish in the event of a loss. You should also consider whether some of your assets should be insured separately with a “rider” to your policy. Riders, which provide additional insurance for high value items, can often be obtained for electronic equipment (computers, TV’s, sound systems), jewelry, art, and silver. You may need to obtain an appraisal to support the addition of such riders to your policy.
Trustees should also review policies for any real properties held in a trust. The trustee is responsible for safeguarding assets, which includes ensuring the assets are adequately insured against loss by fire. Some homeowner’s policies cease to be effective if the home ever becomes unoccupied. Trustees should review policies carefully for such clauses and obtain a replacement policy, if necessary.
Update Your Personal Documents
You should also review your personal estate planning documents make sure they reflect your wishes and are enforceable. Those with elderly relatives in a high-risk area should also offer to assist such relatives with their documents to ensure they are adequately prepared for an evacuation or other disaster.
Secure Important Papers and Information
If possible, you should store your important documents in a place unlikely to burn. Birth certificates, marriage licenses, passports, stock certificates, original estate planning documents, and other irreplaceable items (such as family photos) should receive special consideration. While a “fire proof” safe is good to have, such safes will actually melt in a fire hot enough to destroy a house. It is better to store these documents in a safe deposit box, an office, or other place that is not located in an area that has a higher risk of burning. Professionals may also provide a safe place to store such records. For example, some estate planning attorneys still offer their clients storage for original estate planning documents. Our office offers a vaulting service as a courtesy to our clients.
Inventory Your Assets
Do you remember what you have in the third drawer down in the kitchen cabinet? You might have to list all of those items on an insurance claim. One way to simplify this process is to prepare an inventory now to keep with your important papers. Some insurance companies even provide you with a template you can use for this process. For a detailed example of such a template, see
Have an Exit Strategy.
You should maintain a list of your current medications and doctors with your Advance Health Care Directive or Living Will to ensure this critical information will be readily available if you should experience a health crisis during an evacuation. Health Care Directives can be registered with the state. Having a current Authorization to Release Medical Information (often referred to as a “HIPPA Waiver”) will allow your doctors and other care providers to share information about your care with family members and/or others you trust. A current financial power of attorney can be equally important since it will allow someone else to handle your finances and pay your bills while you are not able to deal with them.
Finally, it is important to review your Will and Trust to confirm these documents are also up to date in the event they are needed.
You should also make copies of these important documents to store in a separate location such as with a trusted friend or relative who lives in place less likely to burn. In the event of a fire, the copies may be accepted by a court in lieu of originals if it can be shown these were in the house when it burned. Please note that if you encrypt your data, be sure to provide someone with the information needed to access that encrypted data in the event you are unable to retrieve it yourself.
It is also a very good idea to periodically back up the information on your computer, your smart tablets, and phones to a portable external hard drive, flash drive, or disk drive, so that this information can be stored elsewhere or taken with you in a hurry. Old family photographs and other irreplaceable documents can also be scanned and stored in order to prevent their loss.
The internet may also provide a good place to store photographs, inventories, and/or important documents. There are a number of “cloud based” storage companies now offering such services. It is important to thoroughly research these companies, however, before storing financially sensitive documents such as tax returns, password lists, financial data, and/or estate planning documents. In addition to confirming the security of the storage location, you should carefully read all usage agreements to confirm who actually owns the rights to these documents and what your rights would be to access the information in the event the company ever goes out of business.
A simpler option would be to take a video of your property including the contents of your closets, cupboards and drawers. Such a video could provide you with useful information for preparing a list of assets lost, as well as prove their existence and condition. We recommend you update such video evidence at least every other year.
Another option is to hire a company that is willing to prepare a home inventory for you. Several such inventory companies came into existence after the last fires in 2007 and still provide these services.
You may also want to consider having your home professionally appraised. The cost of such an appraisal is usually a few hundred dollars. With home values in April up 7.5% over the same period in 2015, you may want to discuss the value with your insurance company now, rather than argue its proper replacement value after a loss. (See San Diego median home price jumps to $489,000, by Philip Molnar, Union Tribune, May 17, 2016).
While we hope this year will not be a bad one for fires, it is better to be prepared. Taking these steps now can prevent additional heartache and extra work in the future.