Each of us has to manage a never-ending stream of financial documents and the common refrain is: “Do I need to keep this"?
First, a few tips:
- Be sure loved ones know where & how to access important financial & legal documents in the event you become incapacitated or die.
- If you have a safe deposit box, be sure you’ve added a joint owner or put the box in the name of a revocable living trust so someone else has access to it. If this hasn’t been done, loved ones will need a court order to gain access to the box which will involve both time and expense.
- Consider creating a “Directory” of key information for loved ones to include:
- Key contacts (e.g. Financial Advisor, Attorney, others)
- Assets (bank, investment, real estate, collectibles, etc.)
- Liabilities (mortgage, other debt)
- Other details/instructions you deem important or relevant
- Keep tax returns and supporting documentation (e.g. W-2s, 1099s, deductible expenses) for 3 years after you file your return
- Click here for details on the IRS Period of Limitations. There are specific situations that may require you to maintain records for longer than 3 years. For example, the IRS website itself states: “Keep records indefinitely if you file a fraudulent return.” We hope this doesn’t apply to you!
Investment-, Bank-, and Credit Card-related Documents
- Account statements (e.g. 401(k), IRA, taxable brokerage) – it is advisable to receive these electronically. If you are ending a relationship with a financial institution, it is a good idea to confirm whether or not you will continue to have online access to these. If not, plan to download final statements and any cost basis information (for taxable investment accounts).
- Cost Basis information – financial companies are now required to maintain this on your behalf. However, you’ll need to maintain all records related to trades in taxable accounts prior to 2013.
- Nondeductible IRA contributions & Roth IRA conversions - keep a record of these types of transactions indefinitely
- Generic documents (with no personal information) can be recycled: prospectuses and other shareholder documents are the most common
- If you’re self-employed, you may need certain bills (for example: utilities or cell phone) for tax purposes. Otherwise, they can be shredded as soon as you verify payments have been made.
- Current properties: maintain all documentation related to the purchase. This includes all expenses incurred in buying or improving your home (legal fees, real estate commissions, remodels, etc.)
- Properties you have sold: maintain all documentation as long as you maintain related tax records (3+ years, see “Tax Documents” above)
- Mortgages (at least until loan is paid off)
Legal and other important documents
- Maintain the following in a safe, secure place:
- Estate Planning documents (Wills, Trusts, Power of Attorney designations, etc.)
- Birth/Marriage/Death certificates
- Divorce decrees
- Social Security cards
- Car titles, Property deeds
- Military discharge paperwork
If you need some help getting organized or want to discuss any of this further, let us know.