How to 'death clean' your finances

The phrase "death cleaning" may sound jarring to unaccustomed ears, but the concept makes sense. It's about getting rid of excess rather than leaving a mess for your heirs to sort out.

"Death cleaning" is the literal translation of the Swedish word dostadning, which means an uncluttering process that begins as people age. It's popularized in the new book "The Gentle Art of Swedish Death Cleaning" by Margareta Magnusson.

Magnusson focuses on jettisoning stuff, but most older people's finances could use a good death cleaning as well.

Simplifying and organizing our financial lives can make things easier for us while we're alive and for our survivors when we're not.

This task becomes more urgent when we're in our 50s. Our financial decisionmaking abilities generally peak around age 53, researchers have found, while rates of cognitive decline and dementia start to climb at age 60.

As we age, we tend to become more vulnerable to fraud, scams, unethical advisers and bad judgment, said financial literacy expert Lewis Mandell, author of "What to Do When I Get Stupid." Cleaning up our finances can help protect us.

Some steps to take:

Automate payments. Memory lapses can lead to missed payments, late fees and credit score damage, which can in turn drive up the cost of borrowing and your insurance. You can set up regular recurring payments in your bank's bill payment system, have other bills charged to a credit card and set up an automatic payment so the card balance is paid in full each month. Head off bounced-transaction fees with true overdraft protection, which taps a line of credit or a savings account to pay over-limit transactions.

Prune credit cards. Certified financial planner Carolyn Mc­Clanahan in Jacksonville, Fla., recommends her older clients keep just two credit cards: one for everyday purchases and another for automatic bill payments.

Closing accounts can hurt credit scores, though, so wait until you are reasonably sure you won't need to apply for a loan before you start dramatically pruning. Or simply shed one account at a time, waiting for a period before closing another.

Set up a watchdog. Identify whom you want making decisions for you if you are incapacitated. Use software or hire a lawyer to create two durable powers of attorney — one for finances, one for health care. You don't have to name the same person in both, but do name backup people in case your original choice cannot serve.

Consider naming someone younger, because someone your age or older could become impaired at the same time you do, said Carolyn Rosenblatt, an elder-law attorney in San Rafael, Calif, who runs AgingParents.com.

Also create "in case of emergency" files that your trusted person or heirs will need. These might include:

• Your will or living trust

• Medical directives, powers of attorney, living wills

• Birth, death and marriage certificates

• Military records

• Car titles, property deeds and other ownership documents

• Insurance policies

• A list of your financial accounts

• Contact information for your attorney, tax pro, financial adviser and insurance agent

• Photocopies of passports, driver's licenses and fronts and backs of credit cards (for security codes)

Scanning paperwork and keeping an encrypted copy in the cloud or on a backup drive or thumb drive could help you or someone else recreate your financial life if the originals are lost or destroyed.