How to manage important documents

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Posted by Kerry Hannon on Jan 12, 2017 8:44:00 AM
Where to keep them and who needs to know where they are.
I know where all my important papers are from paid utility bills to bank and investment account statements to my birth certificate and will. But, to be honest, I’m not sure anyone else does. And when my husband was leaving on a month-long trip to China recently, it struck me that I didn’t know where all his important papers and passwords were stored.
That’s not good. It’s critical to have a good storage system for personal and financial documents not only for you, but so they’re easy to find if a relative or lawyer needs them.
Here are the key documents I recommend you keep safely stored, the duration for which I suggest they be kept, and where they are best held. I suggest you confirm this information with your personal tax and legal advisors.
Master list.
A catalog of all your account numbers, logins and passwords (bank, credit card, investment and retirement), as well as regular household bills and insurance policy numbers (health, home and auto). Include the name and contact information for your attorney, accountant and financial advisor, or broker and insurance agent, as well as the executor of your will; they should be recorded here. I recommend that you have a list of phone numbers of close friends and relatives, and key medical doctors. Share this paper, or electronic document with your spouse or partner, adult child, or someone you trust.
Tax returns.
The IRS advises that you keep your tax return and all your records that support it–such as W-2 forms, 1099 forms, end-of-year bank and brokerage statements, cancelled checks, sales receipts–for three years from the date you filed your original return or two years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return. I recommend you hold on to them for longer in certain situations. Keep records for seven years if you file a claim for a loss from worthless securities or bad debt deduction. In the meantime, the IRS has six years to challenge your return if it thinks you underreported your gross income by 25% or more. The IRS website has a detailed rundown of the types of records needed to verify various types of tax information.
Personal papers. These include your will (and other letters of instruction, such as a durable health-care power-of-attorney form), birth certificate, diplomas, a photocopy of your driver’s license, and Social Security card. If applicable, adoption papers, your marriage license or divorce decree, death certificate of spouse or partner. These should be kept in a hard copy form for your lifetime. If you have lost a birth, marriage, divorce or death certificate, the Centers for Disease Control and Prevention has a database, sorted by state, of how you can obtain new copies.
Loans. Keep any documentation related to loans, including the original loan document and statements, until you have paid off the loan. Once the loan is paid off, only save documentation verifying that you paid in full.
Property-related documents. These show proof of ownership, such as a record of a paid mortgage, a deed to your home, other real estate holdings, such as a vacation home or a cemetery plot, the title to any vehicles you own, or any loan paperwork and statements.
Retain any property tax records and receipts for purchase price and home improvements for at least three years after the due date for the tax return that includes the income or loss on the house when it's sold. Plus, maintain the records of expenses you had from selling and buying the property, such as attorney fees and your real estate agent's commission.
Insurance records. For example: your life insurance, health and disability insurance policies, Medicare cards, a homeowner’s insurance policy, appraisal documents for jewelry, artwork and other valuables. Paid in full receipts for large purchases–jewelry, rugs, appliances, furniture, cars, antiques, computers–should be saved in your insurance file for proof of their worth in the aftermath, in case of loss or damage. Hold on to the paperwork for as long as you have the policy or any unsettled claims. If you have medical expenses that are tax deductible, though, hold on to records for tax documentation for at least three years.
Financial papers. These run the gamut from photocopies of the front and back of all of your credit cards, utility bills, IRA or 401(k) accounts; brokerage, bank and credit card statements and utility bills. Many of these paper documents can be tossed after a year, unless you need proof for tax return deductions. In most cases, when you receive a canceled check, usually electronically these days, from a paid bill, shred the bill. Only hang onto your quarterly statements from your 401(k), 403(b) or other retirement plans until you receive the annual summary. Afterwards, I recommend that you shred the quarterly statements. Keep the annual summaries as long as the account is active. You will need the purchase or sales slips from your brokerage or mutual fund to prove whether you have capital gains or losses for your tax returns.
Where to store your documents?
Safe deposit box or waterproof and fire proof home safe. Make sure someone else you trust knows how to access. If you have a safe deposit box, record its number, bank name and address, and give that information and an extra key to your designated point person.
  • Wills
  • Social Security cards
  • Deeds
  • Vehicle titles
  • Current insurance policies
  • Birth certificates
  • Marriage certificates
  • Passports
  • Master list (as defined above)
  • Written or video inventory of the physical contents of your home.
     
Have a backup. Your accountant, attorney, broker and financial advisor will generally store paperwork on file for you electronically. Confirm and ask for how long they do so.
Electronic storage. In today’s digital world, it’s smart to have an external hard drive or a USB flash drive as an extra level of protection. There are also a growing number of encrypted, web-based and cloud storage services to back-up and store your important papers. Each of these has a few drawbacks, of course, so it will depend on your level of comfort.
One caveat.
If you go electronic, make sure you keep your technology up-to-date. Moreover, if you get married, have a baby, buy a house, or are recently divorced or widowed, review and update your important document files and name new beneficiaries to accounts if necessary.
Make it a priority to locate your important papers, store them safely, shred what you don’t need and tell someone you trust how to access them in an emergency. When the need to access this information arises, you’ll be glad you took the time to safeguard yourself.

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