What to do with all those financial records

Organizing personal financial records and other critical documents is a chore for most of us, but it is never a thankless task — at least, it's not thankless to you or someone else who may need to retrieve those records in the wake of a disaster or death.

Poor recordkeeping can be a nightmare when you need it the least.

Do you have all the records you should?

Start with a good documents checklist — you can find them online, in office supply stores, magazine articles, or your certified financial planner professional might supply a complimentary organizer. During the review you may realize that you don't have everything you should — such as a durable power of attorney, or documents that aren't up-to-date, such as a will or life insurance policy (coverage and beneficiary designation, for example).

One record that's often neglected is an inventory of all your property. This is invaluable if your home is destroyed.

What records should you keep and for how long?

Space prevents a detailed listing here, but here are some of the most critical ones.

Obvious ones to keep indefinitely include wills and related estate planning documents such as living wills and trust documents, Social Security cards, birth certificates and adoption papers, military records, marriage certificates and divorce decrees, driver's license numbers, and passports.

Financial and tax records get a little more complicated. You generally should keep mortgage records (and home improvement receipts) indefinitely, even if you've bought and sold several homes. But you probably won't need to keep car titles or most other property documents once the item has been disposed. Keep indefinitely all records documenting retirement plans and individual retirement accounts.

Tax records make many people nervous, so they tend to hang on to everything. Certainly keep your filed tax returns indefinitely if that makes you feel more comfortable, but supporting documentation you generally don't need to keep beyond three to six years. Regular audits must be done within three years and the Internal Revenue Service has six years to challenge if there's reason to believe you underreported by at least 25 percent. However, it has no time limit if it believes you didn't file or filed fraudulently.

Investment records can pile up quickly, but they're even more important than before because your estate executor will need them to establish basis for assets you hold at your death. Keep the year-end statements from mutual funds for as long as you own the funds, plus three to six years for tax purposes. Pitch the monthly statements at year's end. The same goes for other investment records. Leave stock and bond certificates with your broker.

Dump canceled checks (except those for tax purposes) and ATM receipts once you've confirmed the transactions are cleared. You can throw out credit card slips once they're accounted for, except for those related to tax records or warranties. You don't need to keep the monthly statements forever, either. You can get copies from the company if you desperately need them.

How to organize records

Here's where you can do yourself and your loved ones the most good, even if you hang on to records unnecessarily. A filing cabinet with clearly marked files is a good start. Some experts suggest making copies of critical documents and putting them in accordion files or a box that can be easily taken out of the home in an emergency. Software is another good way to store financial records. It can be updated and backed up easily.

But the most helpful is to keep a master list of where all the financial records are located, along with insurance policy numbers, bank account numbers, and phone numbers of financial professionals. Make sure key family members know where the list is kept. You'll probably want to keep one copy at home and one somewhere else, such as with an attorney or financial planner.

Where to keep the records

Anything difficult to replace, such as birth certificates and an original will, should be kept in a fireproof safe or in a safe deposit box.

Store computer-based backups away from your premises. Your financial planner also might keep some records for you, such as investment account and insurance policy numbers. Also consider storing duplicate records with loved ones.

Zall is a retired federal employee who since 1987 has written the Bureaucratus column for Federal Computer Week. He can be reached at [email protected].


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